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The S&P 500 index managed to log one in all its strongest weeks in 2025. Brief-term breadth circumstances have improved, and the essential 5500 stage has now been damaged to the upside. Are we within the later levels of a countertrend rally, or simply within the early innings of a broader restoration for shares?

Let’s assessment three key charts collectively and consider the proof.

Trendline Break Suggests Additional Brief-Time period Power

My each day chart of the S&P 500 has featured a thick pink trendline since March, when a decrease peak round 5800 offered an ideal alternative to outline the downtrend section. With the fast reversal off the early April low round 4850, the SPX has lastly damaged again above this trendline.

To be clear, after a breakout of this magnitude, I am all the time in search of affirmation from the next day. Will extra patrons are available in to push this chart even additional to the upside? Assuming that is the case, then I am instantly drawn to a confluence of resistance within the 5750-5850 vary. The 200-day shifting common is at present sitting proper across the late March peak, and each of these ranges line up nicely with a value hole again in November 2024.

If the S&P 500 can lastly break above that resistance vary, I’d count on a lot additional upside for danger belongings.

Breadth Circumstances Verify Brief-Time period Market Power

One of many greatest enhancements I’ve seen popping out of the early April low is the improve in short-term breadth circumstances. The McClellan Oscillator has damaged again above the zero stage, most days this week noticed extra advancers than decliners, and the Bullish % Index has undoubtedly improved.

Within the backside panel, we will see that the S&P 500 Bullish % Index has risen from a low simply above 10% on the April low to complete this week at 64%. That confirms that over half of the S&P 500 members generated a degree & determine purchase sign within the month of April!

However the center panel exhibits the true problem right here, in that long-term measures of breadth are nonetheless clearly within the bearish vary. Simply 35% of the S&P 500 shares are above their 200-day shifting common, just like the S&P 500 and Nasdaq 100. It is provided that this indicator can push above the 50% stage that the S&P 500 may stand an actual probability of sustainable features above 5750.

The Stoplight Method Lays Out a Clear Playbook

I like to overlay a “stoplight” visualization on a chart like this, serving to me make clear how I will take into consideration danger relying on the place the S&P 500 sits at any given level.

I’d argue {that a} confirmed break above resistance at 5500 brings the S&P 500 chart into the “impartial” bucket. On this approach, we’re respecting the truth that a rally from 4850 to 5500 is a reasonably spectacular feat, but in addition acknowledging that the SPX stays under its most necessary long-term development barometer, the 200-day shifting common.

If we see additional features within the weeks to come back, the SPX might certainly push into the bullish vary, which for me would imply a push above 5750-5800. In that situation, the S&P 500 can be away from its 200-day shifting common, and I’d really feel way more snug including danger to the portfolio. Till and except we see that upside follow-through, although, I will stay comfortably defensive.

https://www.youtube.com/watch?v=Ok–mA4ptoMo

RR#6,

Dave

P.S. Able to improve your funding course of? Take a look at my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Analysis LLC

Disclaimer: This weblog is for instructional functions solely and shouldn’t be construed as monetary recommendation. The concepts and techniques ought to by no means be used with out first assessing your individual private and monetary state of affairs, or with out consulting a monetary skilled.

The creator doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the creator and don’t in any approach characterize the views or opinions of some other individual or entity.