Today’s spotlight is, of course, the capitulation on indices, particularly the S&P 500, which opened the week with a significant bearish gap. The new trading week kicked off with pressure from a negative close in Asia and a sharp drop in American futures.
Looking at the S&P 500 weekly chart, it’s clear that the gap lower is more than just noise—it’s a technical message. The price has opened significantly below last week’s close and is currently attempting to rebound. But this isn’t just any support level—it’s a confluence of major zones:
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The red area on the chart represents highs from 2021 and 2023, now acting as a crucial horizontal support.
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Even more importantly, we are also bouncing off a long-term uptrend line, a trendline connecting higher lows since the COVID crash in 2020.
This is, technically speaking, a perfect area for a bounce—a key inflection zone where bulls must defend to prevent a broader breakdown. If this area holds and we see a decisive recovery, it could mark the beginning of a long-term buy signal.
However, caution is still warranted. While today’s early bounce shows some resilience, it’s unlikely this is the bottom. A single test and bounce might not be enough to end this downtrend. Instead, we may need to see a double bottom formation or more clear consolidation before declaring victory for the bulls.
On the flip side, if this support zone—both horizontal and dynamic—is broken decisively, we would have a very strong signal to go short, with expectations of deeper correction ahead.
In summary, the market is standing at a crossroads, and this week’s price action will be critical in determining the next major direction for the S&P 500.