Weekly Update S&P 500

Hello everybody, and welcome to this week’s analysis of the S&P 500.
It was a fairly quiet week — until Friday, when the S&P 500 experienced a very sharp drop, closing the week about 3.1% lower compared to last week’s levels.

The main catalyst was news that former President Trump announced an additional 100% tariff on Chinese goods, following China’s threat to impose stricter export controls on rare earth materials. These materials are critical for many global industries, and the move created renewed uncertainty — something markets generally dislike.

Looking at the 4-hour chart, we can clearly see how the S&P 500 moved mostly sideways throughout the week, repeatedly testing its support levels at the 6,700-point zone.
Leading up to Friday’s sharp decline, there were already signs of weakness — with several slightly higher highs that lacked conviction. These are marked on the chart by three red circles at the top.Then came the dramatic drop on Friday: the index fell over 3% within just eight hours, breaking through the 6,700-point support zone, then the 6,600-point level, and eventually dropping all the way to around 6,500 points.
This 6,500 zone is a stronger support area, highlighted in reddish tones on the chart. A short-term bounce is likely since the market is now extremely oversold, but it remains to be seen whether the index can stabilize and form a base here.

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5–10% Correction Now Fully Underway

On the daily chart, we can see the broader uptrend channel marked by the red, gray, and green shaded areas — the same trendlines that have guided price action for the past several months.
With Friday’s steep decline, this channel has now been broken decisively to the downside.

For weeks, we’ve discussed the likelihood of a deeper correction in the range of 5–10%, and it now appears that this move is finally materializing.
Given the magnitude of Friday’s drop, it’s unlikely to be a one-day event; more follow-through to the downside in the coming days and possibly weeks would be typical.

If we look at potential downside targets:

• The 6,400–6,300 zone (marked by the first red circle) served as strong resistance back in August and may now act as support.
  
• A 5% correction would take the index roughly to the first dashed blue line.
  
• A 10% correction would reach the second dashed line lower on the chart.
  
• Another key area to watch is around 6,150 points — the previous all-time high before the April correction (marked by the second red circle).
  

That range between approximately 6,150 and 6,300 (between the two red circles) represents a reasonable potential bottom area for this correction.
The market likely won’t reach it in a straight line — short-term bounces are expected — but this zone could provide meaningful support.

Short-Term Risk Outlook

Looking at the S&P 500’s short-term risk profile, we’ve been in a high-risk environment for several weeks, represented by the red shaded area on the chart.
The sharp drop on Friday aligns with the warning signals we had been tracking — three separate sell signals triggered over the past two weeks.

This confirms the technical message: it has been a period to reduce risk, take profits, or hedge positions.
Of course, no one could have predicted the exact timing or that the catalyst would be a tariff announcement, but the conditions for a sharp drop were already in place.We’ll continue to monitor this closely. Once we return to a low-risk environment and new buy signals emerge, we’ll discuss them in future updates.
For now, the market remains stretched, volatile, and in a correction phase.

We also have an article (Update: October 2, 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.

For subscribers it is very important to follow our risk management measures that we provide with all our services to protect against losses in case support zones break

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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, however, we experienced a sharp correction. That move doesn’t align perfectly with the usual seasonal pattern, but it may have represented the weakness that typically shows up in May or June arriving a bit earlier than usual. From that April low, the market rallied strongly through the summer, continuing higher into late July — a period that generally aligns well with historical seasonality.

However, the typical seasonal soft spot in August and September didn’t really appear this year. Usually, those two months bring some volatility or a correction phase, but the S&P 500 instead continued to trade with strength, avoiding any meaningful pullback.

Looking ahead to the remainder of the year — October, November, and December — these months are historically the strongest period of the year for the S&P 500. But given that we’ve already seen such a strong summer rally and skipped the usual correction phase, it’s reasonable to expect that some of that weakness may still be due.

In other words, the correction that typically occurs in late summer might simply have been delayed rather than avoided altogether. That means we could see it emerge in October or November before the market resumes its usual year-end strength.

Seasonality isn’t a perfect roadmap — it rarely plays out exactly the same way each year. But it does offer useful context. Right now, it suggests that while the broader trend remains positive into year-end, a short-term correction could still unfold before the next strong push higher into December.

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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The world of finance is complex and includes many technical terms. For explanations of these terms, I recommend using the Investopedia dictionary.