S&P 500 Technical Structure is Fractured
Given the weight of last week’s economic data and the remaining earnings releases, it’s fair to say the S&P 500 absorbed some bruising as the market closed the week in negative territory. Volatility levels, which we’ll address later , signaled turbulence was building, and market internals suggest the “rotation” trade remains in effect. While several key technical levels have been violated, a full technical rollover has not yet materialized, and bulls may still have an opportunity to regain control under the right conditions.
From a technical standpoint, the SPX has once again broken below both the 50-day Simple Moving Average (SMA) and the 20-day SMA to close out the week. For the first time this year, the index has closed below the 50-day SMA for two consecutive sessions. The last time this occurred was in mid-November, when the market found support at the 100-day SMA before bouncing and ultimately pushing to new highs.
This two-day break below the 50-day is a high-frequency signal of near-term weakness. However, all is not lost. The market is once again testing the 100-day SMA and attempting to leverage it as support. The larger concern emerges if price action decisively flushes below the 100-day on heavy volume, that would likely signal the start of a more meaningful pullback in the broader market. Should that occur next week with conviction, the next major support zone for the S&P 500 sits near the 6,700 level.
Momentum indicators are also flashing caution. The MACD (Moving Average Convergence/Divergence), which measures price momentum, is at a critical juncture. The 12-day Exponential Moving Average (EMA) has now crossed below the zero line, a traditional signal that momentum has shifted from positive to negative. The next confirmation would be the 26-day EMA crossing below zero as well. That has not happened yet, but it is something traders should monitor closely.
At the moment, technically speaking, the market is at a crossroads. We’ve seen sharp snapback rallies in similar setups before, and there is no rule that says this instance must resolve differently.
As for volatility, the VIX continues to hover near the 20 level, implying an approximate 1.25% expected daily move in the S&P 500. While elevated relative to calm periods, this is not yet indicative of extreme stress. A two-standard-deviation move in volatility would correspond to a VIX near 26. If volatility continues to trend higher, that level could serve as an inflection point for volatility traders and risk managers alike.
The technical structure of the S&P 500 has clearly fractured, but it is not broken. The 100-day SMA now represents the line in the sand for near-term trend integrity. Momentum has turned negative, volatility is elevated but not extreme, and key support levels are being tested. The next few sessions will be essential. A successful defense of support could trigger another reflex rally, while a high-volume breakdown would likely invite a deeper corrective phase. For now, stay nimble.
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