Weekly Update S&P 500

Hello everybody, and welcome to this week’s analysis of the S&P 500. This week was another very interesting one, with the index gaining about 1.6%. That’s quite a strong week, driven mainly by weak inflation data and soft job numbers from the US. These fueled expectations of a Fed rate cut next week, which the market anticipates as bullish. We are currently in a “bad news is good news” environment. With the Fed meeting coming up, volatility could increase significantly, but we’ll discuss that in more detail next week.

Looking at the 4-hour chart of the S&P 500, we’ve been watching this rising wedge pattern for some time now (marked by the black trend lines). The price has respected this pattern nicely since early August. Again this week, we tested the lower boundary of the wedge (see the red circle), and then we broke out to the upside with a very strong rally on Tuesday, Wednesday, and Thursday. This breakout pushed prices up into the resistance zone around 6,600 points, which is expected to provide some headwinds. On Friday, we already saw prices start to weaken a little. A pullback toward the second red circle on the chart — a retest of the wedge pattern we broke — is now likely. From there, we will see how things develop.

It’s worth noting that earlier in September, we had a downside breakout of the wedge pattern. However, the daily candle closed back inside the wedge a few hours later. Something similar could happen here as well: the breakout to the upside might not hold, and we could drop back down into the pattern. But with the wedge narrowing, a decisive break was inevitable.

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Strong Rally Separates Market From Support Zone

On the daily chart, you can see how this strong week lifted us away from the bottom of the rising trend channel, which has been guiding the market for quite some time. The shaded green, gray, and red areas mark the channel boundaries. The strong rally carried us up from the lower green support area, where we had been hovering for several weeks, toward the gray shaded area at the middle of the channel. There’s still a little room to move higher.

However, the resistance zone around 6,600 points is important. Typically, after reaching such resistance, the market pulls back to retest the previous zone — around 6,500 points — before moving higher. A retest of 6,500 would be quite interesting, as it would also break the trend channel, which would be a bearish signal.

Overall, we’ve had a very strong run since the April lows. We are now seeing record numbers in some breadth indicators — for example, the number of days closing above the 50-day moving average. This tells us the rally has gone on for a long time without a deeper correction. Given the seasonality of September, my expectation remains that we could see a deeper correction of 5–10% in the coming weeks. The Fed meeting next week might be the catalyst for such a move. In any case, it’s time to be cautious. This rally has been extended and stretched, and markets rarely move in one direction forever.

We also have an article (Update: September 4, 2025) on the broader S&P 500 outlook. From a big-picture perspective, the technicals on the weekly chart are less positive and suggest that another correction could be developing in the coming weeks.

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S&P 500: Seasonality Insights for 2025

So far this year, the seasonal pattern for the S&P 500 has played out pretty much as expected. The first few months brought some noticeable volatility, which lines up with what we usually see in the early part of the year. Historically, January and February tend to be choppy, and that turbulence can sometimes stretch into March — and that’s exactly what happened this year.

In April, we had a sharp correction, which doesn’t line up exactly with the seasonality pattern. However, it might have been the May or June weakness playing out early this year in April. Since April, we’ve seen a very strong rise into the summer, all the way to the end of July. That, on the other hand, aligns very well with the seasonality.

Now, of course, we are looking into August and September, which are typically weak months of the year. The setup of starting a downturn in August seems to be right on time when we look at seasonality — you can see how prices in August and September tend to have big swings up and down, with a lot of volatility. Therefore, August and September should be expected to bring some weakness.

We will keep an eye on this, and then, when we come into October, we reach the strongest phase of the year. October, November, and December typically bring the year to an end with very strong seasonality. We will see if this holds true this year as well.

Of course, this isn’t a guarantee — it’s more of a roadmap based on past patterns. Ultimately, seasonal trends provide valuable context, but they must be considered alongside current market dynamics and technical analysis for a clearer picture.

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