| | | 3 Factors That Suggest S&P 500 Bulls Are Favored Right Now
A break below key quantified levels must occur for a correction to take place
Todd Salamone
Senior Vice President of Research
Dec 1, 2025 at 9:08 AM
schaeffersresearch.com
“Even if such support levels within the uptrend were violated, my takeaway was that such a scenario did not guarantee a correction, but would up the ante on correction risk…The break of support levels does not mean a correction -- defined as a 10% move below the high -- is a slam dunk…The SPX would be in a corrective state if it moves to 6,200…Since the SPX’s move below its 50-day moving average made the front page of The Wall Street Journal, I have had my doubts if a serious correction is underway. Our quantitative data supports this notion… I find it interesting that buyers stepped in around 6,550 last week, which is where they emerged intraday in mid-September, and again after a sharp one-day decline last month. Be open to the possibility of market participants hyper-focusing on the 50-day moving average that generated a flush that is not as bearish as it appears on the surface”
- Monday Morning Outlook, November 24, 2025
After the S&P 500 Index (SPX—6,849.09) broke below levels that defined bullish quantified patterns in place since April and June, I had said in weeks prior that a break below key quantified levels must occur first for a correction to take place.
I had been making such observations because, since early August, analysts’ voices were getting louder about correction risk. My takeaway was that a crack in the bullish pattern must happen first. And even if a crack in the bull pattern materialized, defined by closes below its 30-day and 50-day moving averages and a bull channel that persisted from June through mid-November, this increased correction risk but was far from guaranteeing that a correction would materialize.
Per the excerpt above, cracks in the bull pattern finally occurred in the middle of this month, with the SPX experiencing closes below its 30-day and 50-day moving averages, in addition to closes below the lower boundary of a bull channel since June.
On the heels of Fed Funds futures traders lowering the potential for a rate cut in December and a bit of technical deterioration in the market, it did not look like a market that wanted to move higher. Additionally, an ugly bearish “outside day” candle on Nov. 20 worsened the “look.” But as our quantified data suggested after the SPX broke below its 50-day moving average after more than 100 consecutive days above it, probabilities favored bulls. Even ugly candles like Nov. 20, in which the SPX traded higher by 1.5% before closing lower by 1.5% did not have bearish tendencies.
The main takeaway from last week is what looked bearish on the surface from a technical perspective was anything but bearish, especially in the context of a front-page article in the Wall Street Journal portraying a bearish picture in conjunction with the SPX’s move below its 50-day moving average, when quantified historical data suggested otherwise.
Last week showed follow-through buying that emerged at 6,550 in the week prior. Comments from Fed governors suggested a rate cut could be imminent, and Fed Funds futures traders reversed their view. That is, as the probability of a December rate cut increased.
By the close ahead of the Thanksgiving holiday, the SPX was back above multiple potential resistance levels, including 6,760. This is 10% above the prior closing high in February.
It also crossed back above its 30-day moving average and the more popular 50-day moving average. A 352-point move lower in the SPX over a three-week period was almost matched in four trading days, as the SPX rallied nearly 300 points from its November 20 closing low into its pre-Thanksgiving Day close.
So now what? From a technical perspective, and as seen in the chart immediately above, there is potential resistance overhead from the lower boundary of the bull channel that was in place from June through mid-November. On Friday, this lower boundary was at 6,857, and this coming Friday it will be at 6,895, or in the vicinity of the end-of-October closing high at 6,890, which is another level to key on in the days ahead as potential resistance.
The first area of support is between 6,720, the 50-day moving average and 6,760, which acted as brief resistance in October. Another area of support is 6,550, where buyers have emerged since September.
Finally, the sentiment landscape has changed in favor of the bulls as of the pre-Thanksgiving close, considering the three factors below:
- The SPX is back above key short-term moving averages with a V-rally from the mid-November low
- The 10-day buy (to open) put/call open interest ratio on SPX components at its highest level since early September, and
- A short interest “explosion” higher in the first half of November, and many of these shorts already underwater
 
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