$SPX $SPY - Market Breakdown w/ a FULL View 📈
》PART 3/3《  Diving into the Technicals

The rise in long-term yields tells a clear story: the economy isn’t falling apart anytime soon. Jobs are strong, spending is steady, and inflation, while still present, is helping businesses keep revenues high. 
Companies with solid cash reserves are thriving, and the recent surge in hiring—likely seasonal—points to strong demand. What’s really exciting is the boost in productivity we’re starting to see, which feels like the first real payoff from AI advancements. 
It’s all happening without wage pressures, which is a major win. If upcoming data shows inflation cooling while the economy stays strong, we’re looking at a rare sweet spot—growth without chaos.
 
So, with this out of the way, let’s dive into the $SPX chart.

I have charted 5 of the most important levels you need to be aware of and keep an eye on this week:

⋆ Pivot Level - 5842
⋆ Pivot Resistance 1 - 5875
⋆ Pivot Resistance 2 - 5924
⋆ 1 Month Low - 5807
⋆ Pivot 1 Support - 5793

Can $SPX and the broader index move lower from here? 
Absolutely, it can. But if you’ve been following my last couple of posts, you’ll know I don’t think it’s as likely as the broader market sentiment would have you believe.

Now, could it go higher from here? 
Also, yes. In fact, I’d argue that’s the more probable outcome right now, and here’s why:

» Selling momentum is fading: 
While the index has been making lower recent lows, the selling pressure hasn’t been accelerating in      tandem. Typically, when a significant retracement is imminent, you’d expect selling momentum to pick up—not ease off like it’s doing now.

» Bullish divergence is showing up: 
There’s a clear disconnect between price action and key momentum indicators like RSI (Relative      Strength Index) and others. When price keeps dipping but these indicators stay flat or start trending higher, it’s often a sign of underlying strength in the market.

» $5800 is a strong technical level: 
This price point has acted as both a solid support and resistance zone multiple times over the past year. Markets tend to respect these key levels, and it’s not likely to give way without a fight.

» The 21-period moving average (weekly) is intact: Historically, $SPX has only broken below this moving      average once in the past year. Every other retracement found support here and bounced. 
Last week, we saw a similar pattern: a brief dip below the moving average followed by a close back above it, which tells me buyers stepped in aggressively at those lower levels.

» Deviation in weekly moving averages: 
On the weekly chart, the short-term moving averages haven’t started diverging much, which would typically signal further downside momentum. If we were looking at another 3% drop, we’d probably see some      early signs of those averages pulling apart, and that just isn’t happening right now—or at least not yet (look at the attached chart).
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A big chunk of this analysis comes down to inflow and outflow numbers. Before a major correction, you’ll almost always see some movement in the commodity markets—especially in #Gold and #Silver. But here’s the thing: Gold hasn’t had any unusual inflows lately. In fact, it’s seen some mild outflows over the past month, which I pointed out in my previous Part 2/2 post.

As for defense stocks like $LMT and $DLT, there’s been no notable activity—no unusual inflows or outflows to signal anything brewing. This is something I picked up on through experience a long time ago: keep an eye on rare metals and defense stocks. Their price action can often hint at whether a small sell-off in the index is just noise or a sign of something bigger, like a larger retracement.

At the end of the day, these charts tend to tell the real story about what’s going on beneath the surface. It’s always worth checking them out before jumping to conclusions!

Honestly, I wouldn’t be shocked if we see a brief drop lower as part of a fake-out, only to reverse quickly with a strong candle that has a long lower wick. It’s definitely within the realm of possibility.
My plan? 
If we get a sharp drop tomorrow (the first trading day), I’ll be buying puts to keep my portfolio delta-neutral during the potential drop. I’ve done this before, like during the Dec 18 sell-off, and it worked well. But for now, I’m not carrying any hedges since I don’t see an immediate need.

Short to intermediate term:
I’m still sticking to my conviction: market sentiment is likely to flip, and we’ll see a bounce soon. There’s quite a bit of data supporting this idea, and I’ll be sharing it over the next few days. I’m talking transaction tape analysis, net flow metrics, net delta studies, and more. The picture that’s forming is one of a market primed for a shift.

Right now, the overall market sentiment is sitting at FEAR, 27/100(source: CNN). Historically, the market tends to behave in a contrarian way at these extremes. When everyone’s overly bearish, it’s often the time to start accumulating alongside smart money. On the flip side, when sentiment leans into extreme GREED, corrections tend to follow—as we just saw with this recent drop. Before this pullback, the market was at GREED, 68/100.

The takeaway? 
Fear-driven markets create opportunities. The sentiment pendulum has swung from greed to fear, and history tells us this is where big money starts positioning for the next move. Let’s see how this plays out in the days ahead!

Hope this 3 part post made sense to you guys and you learned something from this on a fundamental level of the WHY and hopefully can now tie this into your Technical Analysis moving forward.

Will make updates tomorrow as price action reveals itself! Have a great Sunday guys!