By Doug Busch
The S&P 500 is looking increasingly skittish as it nears 7000, a sign that it could fit a pattern seen across financial markets of prices tending to stall or reverse near major round numbers.
Exactly why the index is looking shaky isn't clear. Market prognosticators often reach for long explanations to justify periods of fragility, but those answers are rarely clear in real time and remain debated even in hindsight. The fact is that there doesn't need to be a single catalyst.
Nothing moves higher in a straight line, and since the Liberation Day lows last April, the S&P 500 has advanced more than 2,000 points. A healthy, prudent pullback could go a long way toward setting a foundation for more gains. Recent action in gold and silver, beyond Friday's plunge in prices, has been signaling that something may be amiss beneath the surface.
The S&P 500 daily chart raises several alarm bells. Four of the Magnificent Seven tech stocks reported their results last week, but the numbers failed to move the needle for the index, and that potentially positive factor is now behind us.
When the index tested the 7000 level last Wednesday, the result was uninspiring, printing a bearish counterattack candle. The index finished roughly 25 points off its intraday highs, and the following two sessions produced a bearish hanging man and a spinning top. Both of those are classic signs of fatigue.
With these signals appearing at the top of a bearish rising wedge and the index near a round number, the odds favor a relatively modest 3.5% short-term move lower toward 6700. That is the level of the 125-day simple moving average, which stands equal distances between the 50- and 200-day simple moving averages. Another cautionary signal is that trading volume picked up toward the end of last week.
A look at the two-year weekly chart of the S&P 500 shows the powerful advance off the April lows began with a textbook bullish piercing line candle near the rising 200-week simple moving average the week ended April 11. It was confirmed by a 6% weekly gain on the strongest volume in at least five years following a 9% decline the prior week. That amounted to a clear technical signal that it was time to buy, and that anyone who did so wasn't at risk of catching a so-called falling knife.
Nearly ten months later, however, the easy money appears to have been made. The S&P 500 is now roughly 9% above its 200-week simple moving average. It shows signs of waning momentum with two recent weekly doji candles and a spinning top near the 7000 level.
Notably, the entire move from 5000 to 7000 has failed to produce a weekly winning streak longer than three weeks. In that context, a retracement toward the 200-week simple moving average sometime in the first half of 2026 wouldn't be unusual. It would still be consistent with a healthy longer-term trend.
Monthly candlestick charts, available on Friday, the last trading day in January, offer a clearer view of the secular trend. January volume was the strongest in the past seven months, while the trading range was unusually tight, pointing to growing indecision.
The index gained in eight of the last nine months, but the final closing prices for the last three months of 2025 were within just nine points of one another. That kind of price action historically has often resolved itself with explosive upside, similar to a three-week tight pattern, particularly when a security or index is near record highs.
Against that backdrop, the S&P 500's failure to gain significantly in January appears ominous. The index now sits nearly 2,000 points above its 50-month simple moving average. The fact that January brought another spinning top, its third in the past four months, is more evidence that the market's momentum is eroding faster.
At these levels, chasing potential gains in the S&P 500 doesn't seem to be a smart move. Investors should respect the risks.
Doug Busch is the senior technical analyst at Barron's Investor Circle . His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
February 02, 2026 13:25 ET (18:25 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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