S&P 500 Nears Record Highs but Faces Growing Correction Risks
The S&P 500 has hit fresh highs, but signs of weakness are emerging. While a favorable seasonality could push it towards 7,040 or 7,115, key support levels range from 6,631 to 6,200. The index could potentially pull back by up to 10%, according to Bank of America. Despite recent highs, multiple advance-decline measures have weakened. More stocks are hitting 52-week lows, and fewer are trading above major moving averages. The rally has narrowed, and a break below the 50-day moving average could signal a deeper correction. The index is currently holding within its rising trend channel and finding support at the 50-day moving average near 6,700. To maintain its uptrend, leadership must rotate into sectors like discretionary, healthcare, industrials, and materials. Historically, November and December rise 92% of the time when the index is up through October, with an average gain near 5%. However, a repeat of the 1980 year-end pattern could imply a gain of roughly 6.5% and a move toward 7,280. The S&P 500's uptrend remains intact, but narrowing rally participation and historical parallels keep downside risks on the table. Bank of America, represented by Paul Ciana, recommends a positive outlook for Q4 2025, expecting continued strength supported by strong corporate earnings, easing monetary policy, and broadening market participation.
