S&P 500 Correction Risk

October 28, 2026 · S&P 500 at 7,723 (close 2026-10-27)

6%chance of a 10%+ S&P 500 drop in the next 3 months

In a typical 3 months since 1960 it was 12%.

No warning flags on. The S&P 500 is above its 200-day average, calm, and near its high.

The same odds every month since 1975. Grey bands are 10%+ drops.

The odds tend to jump once a drop is underway, not before it starts. Read a high number as “this fall is likely to go further”, and a low one as “no internal stress right now”, not “no risk”.

How this is counted

Every trading day since 1960 is sorted by three things: above or below its 200-day average, how choppy the past month was against the past 10 years, and whether it was already 5% or more off its high. The number is how often, from days like today, the S&P 500 closed 10% or more below that day's close within 3 months. Likely range 4-8%. Over the next 1 month: <1% against 3% typical.

It rarely warns before a fall starts: 21 of the last 21 corrections began while it read calm, because drops start at highs. Its strength is the follow-through: a market below its trend and choppy is far more likely to keep falling.

It can't see news shocks. The day before the COVID crash it read 1-in-10 (around average). October 1987, August 2024 and April 2025 gave no more warning. The warning flags below are shown alongside but don't change the odds: in a replay they didn't make them more accurate.

Full table

3 months (average across all classified days: 12.1%)

below trend, high vol24.8% [16–33%]119 spells · 63 events

below trend, mid vol29.1% [22–37%]227 spells · 79 events

below trend, low vol12.0% [6.4–19%]138 spells · 27 events

above trend, high vol9.1% [5.1–14%]124 spells · 28 events

above trend, mid vol9.0% [6.3–12%]401 spells · 66 events

above trend, low vol ← today6.0% [4.0–8.6%]323 spells · 61 events

The bracket (here and under the headline odds) is a block-bootstrap 90% interval resampled over regime spells, not days, the honest uncertainty. Note how widely the cells overlap: the real resolution is “below trend & choppy” vs “above trend & calm,” not six distinct numbers.

1 month (average across all classified days: 3.4%)

below trend, high vol10.9% [4.7–17%]119 spells · 40 events

below trend, mid vol9.0% [5.5–13%]227 spells · 31 events

below trend, low vol1.2% [0.3–2.3%]138 spells · 6 events

above trend, high vol4.0% [0.9–7.9%]124 spells · 11 events

above trend, mid vol2.0% [1.0–3.2%]402 spells · 23 events

above trend, low vol ← today0.8% [0.4–1.3%]324 spells · 19 events

What sets the odds

The three things the odds are counted on.

Trend+5.8% vs 200-day averageGREEN

Big drops overwhelmingly start in markets already below their long average.

Volatility32nd percentile (21-day realized)GREEN

Turbulence clusters, choppy markets fall further. Red above the 85th percentile.

Drawdown-1.2% from recent highGREEN

Drops cluster: days already 5%+ off the high were followed by a further 10% fall within 3 months about 2.8x as often as days near the high.

Warning flags

Stress that tends to build before slow, grinding declines. Shown alongside, not in the odds. One on means little; two is a warning.

Credit stress (HY spreads)3.18%, +0.25pp this monthYELLOW

Credit usually cracks before stocks; widening of 0.5pp+ in a month is the flag. One caveat this cycle: private credit can hide stress that used to show up here.

Financial conditions (NFCI)-0.49 (loose)GREEN

Chicago Fed's broad weekly index, the strongest published 1-month warning. Positive = tighter than average.

Layoffs (jobless claims)198k/week, +0% above the year's lowGREEN

New unemployment filings, 4-week average. Rising layoffs mark the slow, recession-type declines, the ones that go deepest. Warning at +10% off the low, red at +20%.

Safe-company spreads (IG)0.88%, quietGREEN

What solid, investment-grade companies pay to borrow above Treasuries. Junk spreads widening alone means trouble in risky corners; both rising together means trouble everywhere.

VIX term structure0.90 (contango)GREEN

Near-term fear above 3-month fear (ratio over 1) has marked every major selloff, but it confirms one underway rather than predicting it. Red only when sustained 5+ days.

How deep a drop could go

These don't time drops. They tell you whether one would likely be the deep, recession kind.

Yield curve (10yr minus 3mo)+1.05%, normalGREEN

The bond market's recession warning, 6-18 months ahead. Too slow to time a drop, but it tells you whether one would likely be the deep, recession-driven kind. Monthly, the same reading as the recession page.

Sahm rule (job losers)+0.00pp (as of 2026-09)GREEN

Rise in unemployment from layoffs, the recession page's version. Doesn't time drops, but declines during recessions run deeper and longer.

Valuation (Shiller CAPE)40.9 (99th percentile, live)RED

Doesn't time anything at 1-3 months, it changes how far drops go once they start. Rich valuations amplify the same shock. Live from multpl.com; percentile vs the full 1871-present Shiller history.

Track record

16 daily readings logged since 2026-10-10. Each is graded against the S&P 500 closing 10% or more below that day's close within three months. None has resolved yet. The first resolves on 2027-01-09.