The S&P 500 has seen a sharp decline in Q1 2025. Our technical analysis examines the bearish signals, including a breakdown below key moving averages and weakening market breadth. We identify critical support and resistance levels to watch for potential trading opportunities.
Chart of the week: US S&P 500
The S&P 500, a major US benchmark stock index, has recorded stellar and outsized returns in the past two years versus the rest of the world, where it notched annual gains of 24% and 23% in 2023 and 2024, respectively.
In a reversal of fortune, a dismal performance was seen on the S&P 500 in the ongoing first quarter of 2025, with a year-to-date loss of 2.4% as of 6 March. The current weakness of the US stock market has been attributed to stagflation fears that were ignited by US President Trump’s trade tariffs policy and a bullish rotation towards China/Hong Kong stock markets due to Chinese artificial intelligence (AI) theme play as well as European stocks fired up by a new proposed aggressive fiscal expansionary policy out from Berlin.
Fig 1: US S&P 500 medium-term trend as of 7 Mar 2025 (Source: TradingView)
In the lens of the technical analysis, more potential weakness may be in store for the S&P 500.
Since hitting a recent fresh all-time high of 6,153 on 19 February, the US S&P 500 CFD Index (a proxy of the S&P 500 E-mini futures) has staged a decline of 7.1% (intraday high to intraday low) as of Friday, 7 March at this time of the writing.
The current price action of the US S&P 500 has retested its key 200-day moving average, now acting as an intermediate support at 5,675.
Several technical elements are bearish, which in turn suggests that the US S&P 500 may stage a bearish breakdown below its 200-day moving average that is likely to trigger a potential multi-week negative feedback loop that may see lower prices on the US S&P 500.
Firstly, the daily MACD trend indicator has continued to trend downwards steadily below its centerline after a prior bearish divergence condition flashed out on 20 February 2025, which suggests a change in the medium-term trend condition of the US S&P 500 from bullish to bearish.
Secondly, market breadth conditions have turned less rosy, as represented by the percentage of S&P 500 component stocks above their respective 200-day moving averages, which have plummeted significantly in the past three months from 64% on 27 January to 47% on Thursday, 6 March.
Watch the 6,010 key medium-term pivotal resistance (also the 50-day moving average) on the US S&P 500, and a breakdown with a daily close below 5,675 may see further weakness to expose the next support at 5,545/520 in the first step.
On the other hand, a clearance above 6,010 invalidates the bearish scenario for a retest on the 6,140 current all-time high area.
