Weekly Update S&P 500

Hello everybody, and welcome to this week’s analysis of the S&P 500. We had a very choppy week with a lot of ups and downs, and overall the index closed about 0.3% below last week’s close.

Looking at the 4-hour chart, we can clearly see this back-and-forth price action throughout the entire week. Monday was a down day, Tuesday moved higher, Wednesday saw a sharp swing to the downside, and Thursday moved higher again. Overall, this was classic range-bound behavior.

What is especially interesting on the 4-hour chart is how well price respected the key levels. On the downside, the 6,900-point zone acted as support, while on the upside the 7,000-point zone capped price as resistance. I marked these reactions on the chart. We saw three tests of the 7,000-point resistance area, followed by a rejection and a move back down toward 6,900. On the downside, we saw two clear tests of the 6,900 support zone, followed by bounces higher. This is very clean price action between well-defined support and resistance levels.

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Rising Wedge Tightens as the S&P 500 Approaches a Decision

Turning to the daily chart, which we published last week, we laid out the rising wedge formation and highlighted the approach toward the 7,000-point zone. The green and red shaded areas mark the lower and upper boundaries of this rising wedge and represent crucial support and resistance zones.

Looking at this week’s price action on the daily chart, these levels once again played a very important role. We saw two tests of the red shaded area on the upside and two tests of the green shaded area on the downside. I marked these tests on the chart. These reactions also align perfectly with what we saw on the 4-hour chart, namely the repeated interactions with the 6,900 and 7,000 zones.

At this point, price is moving into the very end of the wedge formation. I marked the two most important levels with red lines: on the upside, the 7,000-point resistance zone, and on the downside, the green shaded area representing the lower trend line of the rising wedge. Over the last couple of days, price has already closed inside this green shaded support area.

The next few trading days, and especially next week, will likely decide whether price breaks to the upside or to the downside out of this wedge formation. This structure has been forming since November, meaning price has been compressing for nearly three months. That kind of compression usually leads to a resolution with a stronger move. This makes the upcoming period particularly interesting and likely more volatile. As we already discussed last week, a larger move is likely coming, but at this point it is not possible to say whether it will be to the upside or to the downside.

Short-Term Risk Outlook

Now let’s look at the short-term risk indicator. The S&P 500 is shown in black, the buy score in green, and the sell score in red. The lower chart shows the bigger picture, while the top right shows a zoomed-in view of last year’s price action. On the top left, you can see the resulting buy and sell signals as green and red vertical lines.

The rising wedge formation we discussed on the daily chart is also clearly visible in the zoomed-in chart on the top right. While we do not yet know whether the wedge will break to the upside or to the downside, a downside break would likely be accompanied by sell signals from this indicator. Ideally, those signals would come early, although that is not always the case. When sell signals do occur, we would reduce or exit positions accordingly. Any such signals are shared through our free newsletter as soon as they are generated.

Looking at the development of the buy and sell scores over the past week, not much has changed. We had a buy score the week before, and since then both buy and sell scores have slightly declined. There were no major signals this week, which makes sense given that the index moved mostly sideways. The underlying inputs to the indicator are behaving well and remain clearly structured, which is a good sign that future buy or sell signals will be delivered at more meaningful moments.

For now, there is not much to do other than wait. The key focus remains on the breakout from the rising wedge on the daily chart, which will likely occur next week.

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.