Stock Investors Should Stay Cautious if the S&P 500 Slips Toward 6,700
The S&P 500 is closing in on the 7,000 level amid rising volatility, yet the broader technical picture remains constructive.
From a chart perspective, the index continues to face resistance near its all-time high around 6,985, while the most critical downside support sits at 6,720 — the December low. This level is especially important because history shows that when December lows are broken during the first quarter, it often precedes a full-blown bear market.
We’ve seen this pattern repeatedly. In early 2025, the December 2024 lows were violated in March, triggering heavy selling. The same occurred in 2022, when December 2021 lows broke in mid-January, leading to a prolonged bear market. Even the 2020 pandemic crash followed this script, with December 2019 lows breaking in late February before selling intensified dramatically.
At present, there is no active volatility band sell signal. However, the +4σ modified Bollinger Band — currently near 7,100 — remains a potential upside target.
Sentiment indicators continue to improve. Equity-only put-call ratios have flipped back to buy signals following heavy call buying off the Jan. 20 lows. Both the weighted and standard ratios are now firmly on buy signals, a move confirmed by our quantitative models.
Market breadth also remains supportive. Although there were weak sessions on Jan. 16 and Jan. 20, a strong rebound on Jan. 21 kept the mid-January breadth buy signals intact. Cumulative volume breadth recently made new all-time highs, reinforcing the bullish case for further S&P 500 gains.
NYSE new highs continue to overwhelm new lows — even on recent down days. In several sessions, new highs exceeded 200 stocks, including roughly 250 on Jan. 21. This is another sign of underlying market strength.
The most notable technical turbulence has come from volatility. The VIX had been creeping higher from its Jan. 9 lows before spiking sharply on Jan. 20 following the surprise tariff announcement. The brief flattening of the VIX term structure raised concerns, but those fears quickly faded.
VIX has since pulled back, triggering a new “spike peak” buy signal for stocks. Moreover, the longer-term VIX trend buy signal remains intact, as the index never closed above its 200-day moving average for two consecutive days.
The volatility derivatives structure also remains bullish. VIX futures are once again in a healthy upward slope. February futures are now the front month, and as long as they remain below March futures, conditions remain favorable. A sustained inversion would serve as a warning sign, but for now, the structure is supportive.
In summary, the recent “tariff tantrum” flushed out weak hands and nervous profit-takers, showing how quickly selling could accelerate if a truly negative catalyst emerges. Still, as long as the S&P 500 holds above the crucial 6,720 December low, the bulls remain firmly in control. We will continue to follow new signals as they appear and maintain deeply in-the-money option positions.
About DayTradeToWin
DayTradeToWin® is a professional trading education company with over a decade of experience developing rule-based, non-predictive trading software for the futures markets.
Our methodology is built around structure — not opinions, news, or guesswork. Every strategy is designed to focus on:
- ✔ Market confirmation
- ✔ Risk management
- ✔ Trade timing precision
- ✔ Trader discipline
- ✔ Structured decision-making
We specialize in providing traders with objective tools that remove emotional bias and emphasize consistency over prediction.
DayTradeToWin’s software and educational programs are used by independent traders worldwide seeking a rules-driven approach to futures trading.
Educational Disclaimer
All content, software, training materials, and examples provided by DayTradeToWin are for educational purposes only and do not constitute financial, investment, legal, or trading advice.
Trading futures involves substantial risk and is not suitable for all investors. Past performance is not indicative of future results. Always trade with risk capital and consult a licensed financial professional before making investment decisions.
