Last week, we highlighted a bearish divergence forming on the daily chart of the SPDR S&P 500 ETF (SPY). It was a clear warning that the bulls were starting to lose momentum, even as prices continued to push higher.
Right on cue, the market corrected. After a sharp pullback, buyers eventually stepped back in and the indexes found a bottom. Now traders are asking the big question: what comes next?
Why Bearish Divergence Matters
A bearish divergence occurs when price makes higher highs but momentum indicators (such as RSI or MACD) fail to confirm those highs. This often signals that a rally is running out of steam, leaving the door open for sellers to regain control.
That’s exactly what unfolded in SPY — a short-term top, followed by a correction.
The Road Ahead
Now that the market has bounced from its recent lows, here are the key levels and factors to watch:
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Support Retests: Will prior lows hold if bears push again?
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Volume Confirmation: Healthy rebounds need strong buying volume. Weak volume could leave the rally vulnerable.
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Macro Catalysts: Economic data, Fed commentary, and earnings could provide the fuel — or the brakes — for the next move.
If support holds and buyers step up, the bulls may attempt another leg higher. But if volume fades and sellers return, we could be in for a deeper retracement.
Bottom Line
The bears made their presence felt last week, forcing the bulls to regroup. Whether this turns into just a pause in the uptrend — or something more — will depend on how the market reacts in the days ahead.
👉 For the full breakdown, including charts and technical levels to watch, don’t miss this week’s Market Minute.