Weekly Update S&P 500

Hello everybody, and welcome to this week’s analysis of the S&P 500. I’m writing this right around the New York market open on Friday, so the final trading day of the week is not fully included yet. So far, it has been a solid week, with the index up about 1.1%.

Looking at the 4-hour chart, we can see strong upward moves on Monday and Tuesday. A short-term high formed on Wednesday, which I marked in red on the chart. On Thursday, price made a higher low, also marked in red, and during that move the index nicely tested the 6,900-point zone as support. As of Friday, price is holding above this support area. The key question now is whether the S&P 500 can maintain support at 6,900 — a level that failed several times over the past weeks — and finally push higher toward the 7,000-point mark.

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Price Compression Signals Imminent Breakout

Turning to the daily chart, let’s first recall last week’s setup, where we marked the key support and resistance zones in red. We are still trading within the upward-rising wedge, defined by the green and red shaded areas as trend lines.

Looking at this week’s price action, the structure remains intact. We saw a low last Friday that tested the green shaded area very cleanly, marked in red. Then on Wednesday, price reached the red shaded area at the top of the rising wedge, again marked in red. After that, we saw another pullback that tested the green shaded area once more. This shows that price is oscillating tightly between the upper and lower boundaries of the wedge.

The formation is now becoming very narrow, which means a decision is approaching. The market will soon have to break either to the upside or to the downside, and this is very likely to happen next week or shortly after.

For the coming week, the green shaded area remains the key support zone, while the red shaded area represents important resistance. This upper boundary also aligns closely with the 7,000-point level, making that zone especially important.

Because this wedge has been forming since November, price has been compressing for quite some time. This kind of compression builds up energy, which eventually needs to be released — either to the upside or to the downside. If the wedge breaks to the upside, we can expect a strong rally above the 7,000-point mark. If it breaks to the downside, a deeper pullback becomes likely. In that case, the first major support to watch would be the 6,800-point zone, which I marked in red on the chart.

Short-Term Risk Outlook

Finally, let’s look at the short-term risk outlook and buy/sell score. The S&P 500 is shown in black, the buy score in green, and the sell score in red. The lower chart shows the market advance since the October 2022 low. On the top right, we have a zoomed-in view of the past year, and on the top left, the corresponding buy and sell signals generated by the indicator.

Last week, both buy and sell scores were fairly balanced. This week, we saw a slight pullback in price, but the buy score increased to around 6. Since a buy signal is triggered when the score rises above 5, this resulted in a buy signal on Friday. You can see this as a vertical green line on the top-left chart.

The recent buy signals have aligned very well with short-term lows, and so far there have been no sell signals. Overall, the buy signals generated since November have performed well. We’ll continue to track this closely, and any new buy or sell signals will be shared through our free newsletter service as soon as they occur.

We also have an article (Update: December 25, 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 2026

When we look at the seasonality of the S&P 500, the last quarter of 2025 did not line up very well with the typical seasonal pattern. That’s not a problem, though — seasonality should be seen more like a weather model. It gives us a possible direction the market could take, not a precise forecast.

We did see weakness in October, which actually matched the seasonal pattern, as seasonality often points to a softer October. However, we did not get the strong year-end rally that seasonality would normally suggest.

Looking ahead to the first quarter of 2026, the seasonal pattern points to potential weakness in January, followed by rising prices in February, with a possible peak during that month. After that, seasonality suggests renewed weakness into March to start the year. We’ll have to see whether the market follows this pattern.

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.

Track Market Risk with Our Dashboard

Our Market Dashboard provides a quick overview of the current market conditions and, more importantly, the associated risk. You can view a chart of one of our tools, the Risk Level Indicator, showing predicted risk from 1998 to 2025. If you are interested, you can visit our Dashboard site here.

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