The S&P 500’s ongoing bullish momentum may be nearing a stall, as technical indicators suggest a potential drop could be imminent.
The index closed Friday’s session at 6,728, up a modest 0.13%. However, on the weekly chart, it has corrected more than 2%.
Now, a review of the index shows it has fallen below its 50-day moving average (MA) for the first time since April, a possible turning point after months of holding strong above this key support level.
Notably, the 50-day moving average has long acted as a backbone of the rally, and losing it could signal fading momentum.
A similar event occurred in May 2021, when the S&P 500 briefly dipped below its 50-day average before rebounding sharply. While that episode proved temporary, the current move raises doubts about whether history will repeat itself.
For traders, this breakdown is a warning sign. The next few days will be critical to determine if this is just a short-term pullback or the start of a deeper correction. Failure to reclaim the 50-day average could spark broader selling pressure and heighten downside risks.
S&P 500 fundamentals
The latest pullback comes amid a mixture of both bullish and bearish developments in the market.
For instance, the index snapped a three-week winning streak, after a report from Challenger, Gray & Christmas revealed that October marked the worst month for layoff announcements since 2003, prompting a flight to safety that pushed the 10-year Treasury yield (TNX) below 4.1%.
Adding to the pressure, shares of Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) slid after White House AI and crypto czar David Sacks said there would be “no federal bailout” for the artificial intelligence sector amid concerns the market might be in a bubble.
Meanwhile, market fundamentals remain solid. In this case, analysts expect S&P 500 earnings to grow about 11.6% in 2025, with a forward P/E ratio of around 22.7, above the historical average. Seasonality also supports the bulls, as November through April has traditionally been the market’s strongest stretch.
However, caution is mounting with a section on Wall Street sounding the alarm. As reported by Finbold, Morgan Stanley’s Ted Pick, Goldman Sachs’ David Solomon, and JPMorgan’s Jamie Dimon have all warned of a potential 10–20% market correction within the next two years.
Featured image via Shutterstock
