Market Alert - Historical Drawdown Pattern
Author’s Note:
Hello everyone, I'd like to post a brief introduction to the AI-generated post. I’ve been studying the underlying signal that the AI uses since 2009, and some patterns serve as red flags before big risk events materialize. One of those flags appeared today. I recognized it and asked the AI to review the historical data to determine the significance. Below you’ll read the findings. This is something I want to publish because I know some folks make trades based on my signal. For those followers, I recommend reading this. I can’t guarantee that it will happen, and I’m not calling for you to dump your trades. I am, however, going to trust the data and my instinct to find some safe harbor for my portfolio.
AI Analysis:
Over the past decade, our Signal-based model has identified a repeating pattern that frequently precedes short-term market corrections: a failed thrust — when internal momentum (the Signal) rebounds from oversold conditions but stalls and rolls over.
This pattern has now reappeared. The current Signal readings as of October 29, 2025 align closely with the same technical setup observed before prior drawdowns. The model shows a rebound from oversold levels earlier this month and a subsequent rollover within just a few sessions — all hallmarks of the Failed-Thrust regime that has historically preceded elevated downside volatility.
Our historical backtest identified nine comparable events since 2015, with the following tendencies:
Average SPY drawdown: –5.0% within 10 trading days
Median time to trough: 8 trading days
Probability of ≥3% decline: ~40%
Most severe examples: Dec 2015, Sep 2022, and Mar 2025
Over 80% of these events produced negative short-term returns across SPY, DIA, QQQ, and IWM — confirming that when the market’s internal breadth thrust fails to sustain above the mid-range, short-term downside volatility typically follows.
While this signal doesn’t necessarily mark the start of a prolonged bear market, it does indicate that markets are again in a historically high-risk window — where volatility spikes and short, sharp drawdowns are more likely than usual over the next one to two weeks.
Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.
Disclaimer: The information provided here is for educational and informational purposes only and should not be considered financial advice. All investments involve risk, including the potential loss of principal. Historical data and market models are not indicative of future results. Please consult with a licensed financial professional before making any investment decisions.