Market Extra: Stop saying the Dow is moving in and out of correction! That is not how stock-market moves work

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The Dow Jones Industrial Average is in correction territory, a move that took effect on Feb. 8 when the blue-chip gauge closed 10.4% below its late-January high.

Market technicians generally define a correction as a decline of 10% to up to 20% from a recent peak in an asset. But once that security slips in to correction phase, that trend is viewed as in force until it trades above its previous peak.

Read: History suggests the correction isn’t near over, as this chart demonstrates

In the case of the Dow, its previous high was Jan. 26 when it closed at a record of 26,616.71. The Dow DJIA, -1.77% came within 4.5% of that apex on Feb. 27, but that uptrend faltered.

Also read: Did the stock market crash? Do the math, and check the yield curve

FactSet, MarketWatch

On Friday, the average fell below its Feb. 8 closing low at 23,860.46 in intraday trade, which could be viewed as a sign of bearish momentum. Some media outlets like to say that the Dow has re-entered correction territory when it fell back to around its 2018 low.

However, that isn’t technically accurate because it never exited correction. In other words, an asset doesn’t switch in and out of correction, it remains in that phase until it breaches a fresh peak or falls sufficiently enough to be deemed in bear territory, defined as a drop of at least 20% from the peak.

The S&P 500 index SPX, -2.10% also is in correction phase, which the broad-market index hit on Feb. 8 at 2,581, 10.2% from its all-time high in late January.

That is how MarketWatch thinks about corrections.