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By conventional reckoning, the S&P 500 Index (SPX) has had one correction so far in 2018, a 10.2% decline from the record high close on January 26 through the close on February 8, a brief pullback that lasted just 13 calendar days, per Yardeni Research Inc. Or maybe the correction is still underway, having lasted 88 calendar days and 52 trading sessions through April 24, making this the longest correction since May 2008, according to MarketWatch. Perhaps there are even more ways of looking at corrections.

The 2018 Correction: Conventional Measurement

The S&P 500 closed at a value of 2,872.87 on January 26. This was both its all-time highest close, and its all-time peak reached at any point during any trading day. The conventional method for measuring corrections, as used by Yardeni, looks strictly at closing prices. A correction involves a price decline of at least 10%, and is measured from a market peak to the subsequent market trough. That trough was reached at the close on February 8, which was 13 calendar days and 9 trading sessions later, at 2,581.00, 10.2% below the January 26 peak.

If you expand the analysis to include intraday prices, the trough was reached one day later, February 9. The S&P 500 sunk as low as 2,532.69 on that day, but recovered to close at 2,619.55. On this basis, the correction bottomed out at an 11.8% decline. That intraday low on February 9 is also the lowest point that the index has reached so far this year. As of the close on April 24, the S&P 500 is down by 8.3% from the January 26 high.

The Alternative Measurement

MarketWatch cites analysis by The Wall Street Journal Market Data Group that considers a correction to remain underway until the previous market peak has been regained. Based on the number of trading days that MarketWatch indicates as the length of the current correction so far, it is apparent that this method starts the count on the day that the index first traded below 90% of its previous peak. So, the count began on February 8 and will continue until the S&P 500 reaches 2,872.87 once again, 9.0% above the April 24 close.

According to WSJ data reported by MarketWatch, the current correction is the longest since the one ending on May 1, 2008. From a peak of 1,409.13 on January 9, 2008, the S&P 500 bottomed out at 1,256.98 (10.8% lower) in intraday trading on March 17, 2008, and regained that peak on May 1, 2008. By this set of definitions, that correction lasted 33 trading days.

Longer Corrections Mean Shorter Bull Markets

The alternative method for measuring corrections also has ramifications for dating and measuring bull markets. The conventional method considers the current bull market to have begun at the close on March 9, 2009, the trough of the previous bear market. But if corrections (and also, presumably, bear market declines of 20% or more) are not deemed to be over until the previous peak is regained, the current bull market did not really begin until more than four years later, on March 28, 2013. That is when the previous bull market peak of 1,565.15, set on October 9, 2007, was reached once again.

MarketWatch essentially argues that the 2018 correction is longer and more severe than typically reported. To be logically consistent, they also should argue that the current bull market is much shorter (five years rather than nine years) and of a much smaller magnitude (a 68% gain rather than a 289% gain through April 24) than standard measurements indicate. 

Double Dip Below 10%

Without explaining his methodology, John Stoltzfus, chief investment strategist at Oppenheimer, told CNBC "we've had two separate 10% pullbacks" this year. More accurately, taking intraday prices into account, the S&P 500 has been more than 10% below its January 26 peak on two separate occasions, February 8–9 and April 2. In any case, Stoltzfus sees solid fundamentals that will propel the index to close 2018 at 3,000, whereas other pundits see a host of negative factors that will trigger a plunge of 30%, 40% or even 60%. (For more, see also: Stocks' 'Remarkable Resilience' Can Boost Market 12%.)

Recent History of Corrections

Per the WSJ data cited by MarketWatch, the average correction since 1950 has lasted 61 trading days, while the last five corrections have averaged 37 sessions. Analysis by Goldman Sachs Group indicates that the typical correction takes 70 days to reach the trough, followed by a recovery period that averages 88 days, MarketWatch adds.

Using what we call the alternative method above, Bloomberg has reported that, on average, the four corrections after 2009 but prior to 2018 lasted 200 days and reduced the value of the S&P 500 by 14%. The longest took 417 days. Per the standard method used by Yardeni, the averages were 106 days and a 15% drop, while the longest lasted 157 days. (For more, see also: 5 Stock Corrections Show More Pain Ahead.)

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