The S&P 500 (SPY) concluded last week at a fresh low for 2026. The descent was once again interrupted by sharp rallies, this time prompted by a vague statement from the President regarding a potential imminent end to the war. The trading pattern was familiar, featuring a panicked Monday opening, a subsequent recovery, and weakening momentum into Thursday and Friday as traders reduced risk exposure ahead of the weekend.
Despite appearances of chaos, the selling pressure has been relatively orderly, with technical support and resistance levels proving effective. For instance, recent analysis correctly identified the 6630-60 zone as support and 6850 as resistance, levels which the market respected during the week.
While predicting news flow or exact market movements is impossible, analyzing market behavior, setting realistic expectations, and preparing with key technical levels can be highly beneficial. This analysis also explores the potential for the current corrective phase to conclude in the coming weeks.
S&P 500 Monthly Chart
With two weeks remaining in March, definitive conclusions from the monthly chart are premature. However, a DeMARK exhaustion signal appears to be influencing price action. Following the breach of the December lows, the October/November lows around the 6521-50 area now appear to be a likely target.
The current pattern bears resemblance to that of February/March 2025, which preceded a significant move in April. A monthly close above 6800 would be necessary to negate the current bearish pattern and suggest a reversal to the upside.
The ongoing pause is occurring at a major resistance level near channel highs, just above the significant 6958 target, which represents the 161% Fibonacci extension of the H1 decline.
The next major support level is at the October/November lows of 6521-50. A break below that area would bring the 6147-200 zone, a major breakout level, into focus.
A DeMARK exhaustion count completed in February. Historically, this signal has preceded declines of at least 10% on the last three occurrences.
S&P 500 Weekly Chart
The weekly chart formed another bearish bar, characterized by a lower high, a lower low, and a close near the lows. The 20-week SMA, now broken, acted as resistance during last week's bounce, confirming the index's acceptance into a new trading range below 6764.
Potential positive developments are emerging. Firstly, the rising 50-week SMA may provide support in the coming weeks. Secondly, a downside DeMARK exhaustion count will advance to bar 7 (of a possible 9) next week. A market reaction, such as a bounce or stabilization, is common around bars 8 or 9, suggesting that further selling could lead to exhaustion.
Key resistance levels are identified at 6764 and 6845.
Minor support is seen at the gap fill level around 6600, followed by the major 6520-50 support zone. The 50-week SMA, currently around 6450, is rising approximately 20 points per week.
S&P 500 Daily Chart
The S&P 500 has declined over 5% from its high, a slow and deliberate process spanning 31 sessions. Corrections often begin gradually before accelerating into a capitulation phase, so a change in market behavior remains a possibility later this year, potentially after a recovery.
The immediate focus is on the 200-day SMA, situated at 6604. While futures tested this level last Monday and bounced, the cash index has yet to touch this significant benchmark. Price action around the 200-day SMA can be volatile, as traders position for either a bounce or a breakdown. A strategy some favor is trading a break that causes brief panic but is followed by a recovery, which can shake out weak bullish positions and trap bearish ones.
Initial resistance lies in the 6764-80 range, near a declining trendline. A break above this area could signal a bullish move towards 6845-50.
The gap at 6602 and the 200-day SMA provide the next minor support, with the key 6520-50 zone below. A downside DeMARK count completed last Thursday but has not yet manifested an effect.
Market Drivers and Events
Amid surging oil prices, rising yields, and stocks at 2026 lows, the administration faces pressure. Recent comments aimed at calming volatility had a temporary effect, but a swift resolution to the ongoing conflict appears unlikely given current geopolitical realities. Therefore, unless a specific de-escalation is announced, market rallies may lack sustainability.
Economic data is currently secondary to geopolitical events. Recent inflation figures were largely irrelevant as rising oil prices have yet to be fully reflected; next month's data will be more critical. The upcoming FOMC meeting is the main scheduled event. No policy change is expected, and the Fed is likely divided on prioritizing inflation versus labor market concerns. Commentary on the conflict or market support measures is possible but perhaps premature.
Outlook for the Coming Week(s)
The focus early next week will be on the 6600 area, encompassing the 200-day SMA and the weekly gap. Given the weak Friday close and recent patterns, a lower low on Monday, potentially opening below 6600, is plausible. This could trigger further rhetoric.
A move back above 6636 into last week's range could signal another bounce, potentially targeting 6764-80. However, a weekly close back above the 20-week SMA near 6850 would be needed to indicate a more sustained recovery rather than a temporary bounce. A decisive break below the 200-day SMA would target the 6520-50 support zone.
In the bigger picture, the current two-sided volatility is likely to persist for several more weeks as exhaustion signals develop and the 50-week SMA converges. A conclusion to the correction may be approaching if technical factors align bullishly, but for now, a cautious stance on equities is maintained.
