The S&P 500 has moved lower since the January highs and remains under pressure, with a gap down this week changing the prior technical view. The move is now described as a fifth wave within a higher degree corrective pattern.
If this scenario holds, the decline could extend towards the 6,370 to 6,500 support area, with 6,772 acting as a key level. A move that overlaps and closes above 6,772 would invalidate the view of a bearish incomplete impulse within wave C from a larger wave B triangle.
Key Resistance And Gap Levels
A gap around 6,700 from Sunday is also flagged as possible resistance early in the week. A rebound towards 6,700 followed by another drop would still align with the bearish setup.
For a more bullish read, one approach is to wait for the drop from 6,970 to finish. Another is to wait for an overlap and a daily close above 6,772, which would indicate that a low may already be in place.
We believe the upward momentum from the January 2026 highs has ended, and the S&P 500 is now in a larger corrective pattern. The VIX, often called the market’s fear gauge, has just climbed above 25, reflecting a significant increase in trader anxiety. This suggests that simply buying this dip may be a risky strategy in the immediate future.
The pressure on stocks is being magnified by growing geopolitical risks in the Middle East, along with last month’s hotter-than-expected CPI report which has dampened hopes for near-term rate cuts from the Federal Reserve. We see this combination of factors supporting a continued move lower for the index. The decline in the S&P 500 is now over 8% from its peak earlier this year.
Positioning And Confirmation Signals
Given this outlook, derivative traders could position for a drop toward the 6370 to 6500 support area, potentially using put options or bear put spreads. The recent CBOE put/call ratio hitting 1.15, a high not seen since the pullback in the fall of 2025, indicates many are already preparing for further weakness. These bearish strategies would be invalidated if the market manages a daily close above the 6772 resistance level.
In the immediate short term, we are watching the resistance level around 6700. A bounce to this area that fails and turns back down would be a strong signal that the bearish trend remains intact. This could present a favorable entry point for traders to initiate or add to short positions.
For those looking for a bullish reversal, it seems prudent to wait for more confirmation. One option is to wait for the decline to fully play out and find support in the 6370-6500 zone. Alternatively, a decisive break and close above 6772 would signal that a low might already be in place, though time feels to be running out for this scenario.
