Dear traders, dear stock market friends.
In recent weeks, the performance of the S&P 500 appeared to be heavily driven by daily news. The Middle East conflict, fluctuating oil prices, rising bond yields, inflation data, the U.S. labor market, and the Federal Reserve's future monetary policy repeatedly caused short-term price movements.
Especially in such market phases, however, it is particularly important to tune out the daily news noise and instead analyze as calmly as possible where capital is actually flowing. After all, all of this information, expectations, and positioning are ultimately reflected in prices. Looking at the charts and, in particular, at market breadth therefore frequently provides more valuable insights than attempting to interpret every single piece of news and every short-term market reaction.
S&P 500 defends weekly EMA 20
Taking a look at the long-term trend on the weekly chart, the technical picture of the S&P 500 initially looks completely healthy. Following the breakout to the all-time high in the trading week starting August 3, the index corrected back to the breakout level (the former all-time high) and formed a reversal signal there last week in the form of a hammer candlestick pattern. The correction extended only as far as the 20-week EMA (purple). This shows that strong bullish momentum is still present.
The daily chart also shows that the currently relevant short-term support is in the area of around 7,500 points. In addition to the weekly EMA 20, the old broken downtrend line runs here and a few points below that is the daily EMA 100. In addition, the local highs from June and July provide horizontal support.
Should this support zone not hold, the next correction target would be around 7,250 - 7,300 points.
Market breadth shows clear weakness signals
In addition to looking at the index itself, market breadth analysis often provides very reliable signals, which are considered leading indicators in particular. Bullish signals in the S&P 500 must be confirmed by market breadth for a trend to be considered “healthy.” A divergence between the index and market breadth, on the other hand, is an important warning signal.
Precisely such a divergence currently exists. While the S&P 500 Index is in a completely intact upward trend and is trading only two percent below its all-time high, market breadth is already showing signs of weakness.
The Advance-Decline line has been in a steep downward trend since mid-August, and the McClellan Oscillator (which is based on the Advance-Decline Line) is also signaling bearish market breadth momentum.
Despite the recent downward movement of the AD Line, the long-term upward trend is not yet broken. A stock market correction is usually also accompanied by weakness in market breadth, which is why current developments represent an important warning sign, but should not (yet) be seen as a harbinger of a trend reversal in the S&P 500. This would only be the case if the divergence between the S&P 500 and the AD Line continues and a clear downward trend emerges in the AD Line.
The number of new 52-week highs and 52-week lows on the New York Stock Exchange (NYSE) also confirms the trend of the advance-decline line. Throughout September, there were more stocks with new 52-week lows than stocks with new 52-week highs on every single day.
Moreover, only 52 % of all stocks in the S&P 500 are currently above their 200-day simple moving average. The 200-day line is considered an indicator of the long-term trend. When 50 % of all stocks or fewer follow the index's trend, this is usually a clear sign that increasing weakness and declining market breadth are already becoming apparent beneath the surface. While the index may continue to hold at a high level, it is then supported by fewer and fewer stocks. At the New York Stock Exchange, this figure has already fallen below the 50 percent threshold and stands at 45 %.
S&P 500 is (still) in the seasonally weakest phase of the year
However, when classifying this weakness, seasonality must not be disregarded. Historically, September is one of the weakest months of the year for the US stock market. A correction of the S&P 500 is therefore by no means unusual during this phase. At the same time, this seasonal weakness is frequently accompanied by a deterioration in market breadth.
Therefore, it will be crucial how the market behaves in the coming weeks. The bullish case would remain completely intact if the S&P 500 starts a new upward movement towards the end of September or in October and this rally is once again supported by a broader number of stocks. A recovery of the Advance Decline Line as well as an increasing percentage of stocks above their important moving averages would be important confirmation signals in this regard.
NYSE Composite Index oversold
With the correction of the past few weeks, we saw another interesting development: the number of stocks on the New York Stock Exchange trading above the 20-day SMA is currently only 21.7 %. The 20 percent mark is usually a threshold signaling that the market is oversold. In an intact bull market, this signal often presents good buying opportunities. As can be seen in the chart below with the green dashed horizontal lines, precisely these points in time in the past have mostly led to a new upward movement.
Conclusion: Bull case remains intact (for now)
The long-term upward trend of the S&P 500 remains intact. At the same time, the seasonally weakest phase of the year is coming to an end. Historically, a significantly more favorable stock market phase follows, which is why late September and October often present attractive entry opportunities within an ongoing bull market.
The currently heavily oversold signal in the percentage of NYSE stocks above their 20-day SMA also suggests that a new upward movement could be imminent. Especially within an intact bull market, comparable signals have worked very reliably in the past.
The development of the coming weeks will be all the more interesting. If no sustained recovery begins despite the oversold condition (NYSE % Stocks above SMA 20), the approaching seasonally stronger phase, and the still intact long-term upward trend, this would be a clear warning sign. In that case, the current weakness in market breadth would also have to be evaluated much more critically.
Author: Tobias Schmid
Date: 09/21/2026
