Weekly Update S&P 500

Welcome to this week’s analysis of the S&P 500. The index had a strong week, gaining about 2%. Looking at the daily and 4-hour chart, we can see how the index managed to break out of the downward-sloping trend channel that we discussed last week. The channel, marked by black trendlines, had contained price action since the decline that began on October 10th.

On Monday, the S&P 500 broke out of this downward channel to the upside with strong momentum. A successful retest of the breakout followed on Wednesday — highlighted on the chart with a red circle — right around the 6,700-point support zone. That level held well, and from there, the index staged a strong rally through Thursday and Friday, pushing all the way up toward 6,800 points.

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Key Resistance at 6,800 Could Trigger Short-Term Pullback

On the daily chart, we can clearly see the breakout from the descending trend channel, followed by the retest at 6,700 and a powerful move higher to 6,800. The 6,800 level is marked as a darker orange zone, indicating a stronger resistance area compared to lighter orange zones on the chart.
Currently, the index is sitting right within that resistance zone. A short-term pullback, perhaps back toward the 6,700-point support level, would not be surprising. Nonetheless, the breakout and follow-through are technically bullish, showing a strong recovery from the sharp drop on October 10th.

Short-Term Risk Outlook

However, concerns appear on the weekly chart. The index is looking overextended.
Our risk chart shows this condition clearly: the green bars represent the buy score, and the red bars represent the sell score. The sell signals highlight times when the market was similarly overextended on a weekly basis — when the RSI was above 70 and prices closed outside the 50-week Bollinger Band.

This condition has occurred only six times since 2017, including the most recent one over the last two weeks. Each of the previous five instances led to a correction — the smallest being around 7%, which occurred in April 2024. These six occurrences are marked on the chart with red arrows. While prices can sometimes remain overextended for a short period and even push slightly higher, each case was followed by a notable correction.

This is the main concern at the moment. The 4-hour and daily charts show a bullish breakout, but the broader picture signals that the market is stretched on a weekly timeframe. To unwind this overextension, a correction in the range of 5–10% in the coming weeks would be quite reasonable.

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.

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.