HAS THE MARKET BOTTOMED?

 

HAS THE MARKET BOTTOMED?

A Technical Analysis of the S&P 500

The 200-Day Moving Average, the VIX Spike, and What Comes Next

 

The S&P 500 just posted its first winning week since the Iran war began on February 28. The index rallied 3.4% on the week, the Nasdaq soared 4.4%, and the Dow added nearly 3%. After five consecutive weeks of losses, that kind of bounce naturally leads to the most important question in markets right now: has the market bottomed?

The short answer is: not yet. But the evidence is more nuanced than a simple no. Let me walk you through everything a technical analyst would examine, cross-referenced across multiple reliable sources, and then give you the verdict.

 

 

The S&P 500 closed at 6,582.69 on April 2, the last trading session before the Good Friday closure. The all-time high of 7,002.28 was set on January 28, 2026. As of Thursday’s close, the index sits 5.67% below that peak. The 52-week low is 4,835 from April 2025, which is roughly 24% below current levels.

Thursday’s session was remarkable. The index reversed from a steep intraday decline of more than 1.5% to close slightly positive, driven by reports that Iran and Oman were coordinating a protocol for ship passage through the Strait of Hormuz. That kind of intraday reversal from deep red to green is the type of price action that characterizes bottoming processes — or, equally, the type of head-fake that traps eager buyers in bear market rallies.

The week before (ending March 27) was the opposite: the S&P closed at a seven-month low of 6,368.85, down 1.67% on the day. The Dow fell 793 points and entered correction territory. That session sealed the fifth consecutive weekly loss — the longest losing streak since 2022.

 

This is the single most important technical development of the past two weeks, and it’s the reason I titled this piece the way I did.

As of April 1, the S&P 500 was trading at 6,575, below its 50-day moving average of 6,789 and just under its 200-day moving average of ~6,640–6,690 (different sources vary slightly; StreetStats has it at 6,641.85, Investing.com at 6,689.34). The index has been below its 50-day since February 27 and below its 200-day since March 19 — the first time below the 200-day in over a year.

Here’s what happened: during this week’s rally, the S&P traded right up into the 200-day moving average zone and then buying disappeared. This is textbook behavior in a confirmed downtrend. The 200-day, which previously acted as support during the 2025–2026 bull run, has now flipped to resistance. Large institutional investors and quantitative models use the 200-day as a trigger for adjusting exposure. When price approaches from below, the same algorithmic and institutional flows that used to buy the dip now sell into strength.

The 2025 Analog

David Keller, CMT (President and Chief Strategist at Sierra Alpha Research, writing for StockCharts on March 31) drew a direct historical parallel. In early 2025, the S&P dropped from 6,150 to 5,500, then bounced back to the 200-day moving average. That moving average then served as price resistance. After the test, an absence of willing buyers meant the downtrend could continue, eventually leading to the April 2025 low at 4,835.

Keller specifically noted that the March 2025 bounce featured a classic “evening doji star” candle pattern at the 200-day retest — one big up day, a doji, then a big down day. He is watching for the same pattern now. He described these countertrend rallies as “sudden, severe, and seductive” — noting that the most bullish-looking price moves often happen during bear market phases.

The message from the 200-day rejection is clear: the burden of proof is on the bulls. Until the S&P can reclaim the 200-day with a decisive weekly close above ~6,700, any rally into that zone is a selling opportunity, not a buying opportunity.

 

On Friday March 27, the CBOE Volatility Index surged 13.16% to close at 31.05. The monthly high reached 35.30. A VIX above 30 is firmly in “fear” territory and is typically associated with major market stress events — the 2020 COVID crash, the 2022 Fed rate-hiking selloff, the 2015 China devaluation shock.

This is significant because VIX spikes above 30 have historically been followed by positive forward returns. Data shows that when the VIX climbs to extreme levels, the S&P 500 is, on average, higher 12 months later more than 90% of the time. However, the VIX did not reach the more extreme 40 level, which Wells Fargo has identified as a historically near-certain buying signal (S&P 500 up 30%+ on average a year later when VIX hits 40).

The VIX spike to 31 on March 27 coincided with the S&P’s seven-month low of 6,368 — and buying came in at the end of the following session on Monday March 30. The sequence was: fear spike → lower low with absorption buying → explosive upside reversal. That Tuesday, March 31, the S&P surged 2.9% — its best day since May — after Iran signaled willingness to negotiate, with more than three-quarters of stocks participating in the advance.

This VIX-to-reversal pattern is a legitimate bottoming signal. It does not guarantee a durable bottom, but it does suggest that the 6,340–6,370 zone may represent a tradeable low.

 

This is where the bottom thesis runs into trouble.

As of April 1, only 27.6% of S&P 500 constituents were trading above their 50-day moving average (index percentile: 12, meaning unusually weak participation). Only 49.2% were above their 200-day average (percentile: 25, below average).

Breadth improved from below 20% at the prior week’s low to roughly 28% — but that’s still dramatically below the 70%+ levels seen during the broad-based rally earlier in 2026. For a confirmed bottom, technicians look for a Zweig Breadth Thrust — a rapid expansion from oversold to overbought breadth readings within 10 trading days. We are nowhere close to that signal.

Keller outlined three conditions for a bullish turn: rotation into offensive sectors, improving breadth, and breakouts in growth stocks. None of these are confirmed.

 

On Thursday April 2, the best-performing sectors were real estate (+0.85%), energy (+0.75%), and utilities (+0.74%). Energy majors like ExxonMobil, Marathon Petroleum, and Occidental Petroleum all traded higher on elevated crude ($113+/barrel). Airlines including United (-3%) and Southwest (-2.56%) fell sharply on fuel cost concerns.

This is a defensive rotation — not the leadership profile of a market that has bottomed and is ready to run. A durable bottom gets led by technology, consumer discretionary, small caps, and financials. Instead we’re seeing utilities and energy leading, which is classic risk-off, stagflationary positioning.

The Real Estate Anomaly

Real estate moving higher while rates are elevated and the jobs report reinforces “higher for longer” deserves scrutiny. The 10-year Treasury sits at 4.31%. Traders are pricing in zero Fed cuts for the remainder of 2026. In a normal environment, that’s a headwind for REITs — higher rates compress REIT valuations because dividend yields become less competitive against risk-free Treasury yields, and borrowing costs rise.

Several explanations exist. First, in a stagflationary environment, real assets (property, infrastructure) get bid up as inflation hedges. Second, REIT subsectors like data centers and cell towers are essentially tech-infrastructure plays that benefit from the AI buildout regardless of rates. Third, the sector was heavily oversold after getting hammered in mid-March and may be experiencing short-covering.

Regardless of the reason, when real estate leads during a rally week while rates are rising, that’s a signal of confused market internals — not the clean, conviction-driven breadth expansion you want to see at a durable bottom.

 

The RSI stands at 45.7% (StreetStats) — below the neutral 50 level but well above oversold readings (sub-30) from late March. Financhill’s reading shows 39.23. Neither reading has reached the deep oversold extremes that typically mark durable bottoms.

The MACD is at -83.97 — deeply negative, confirming bearish momentum. Bollinger Bands (25) at 6,647–6,898 and (100) at 6,723–6,940 both signal a sell. The absence of a deep RSI washout (sub-25) during this decline is actually concerning for bottom-hunters — it suggests we haven’t seen the kind of panic that exhausts sellers and clears the decks for a new uptrend.

 

McClellan Financial Publications noted that the oscillator formed a third bottom higher than the prior two — a pattern that Sherman and Marian McClellan highlighted in their original 1970 work as conveying a “big bullish message.”

This pattern suggests that even as prices declined, the momentum of the decline was weakening. Sellers were losing energy. The higher third bottom is a sign that the internal structure of the market is stabilizing even if the index price hasn’t reflected it yet. However, this signal needs to be confirmed by a breadth thrust — which has not occurred.

 

Using the April 2025 low (~4,850) and the January 2026 high (7,000), a 38.2% Fibonacci retracement gives an initial downside target of approximately 6,170, which aligns with the early 2025 resistance-turned-support around 6,150. A move to that level would represent a roughly 12% drawdown from the ATH — within the range of a normal annual pullback even in bull market years.

Key support levels in order: 6,550 (the “line in the sand” that already broke and now acts as resistance below the 200-day), 6,340–6,370 (the March 27/30 lows where the VIX spiked), 6,310 (March intraweek lows), and 6,150–6,170 (Fibonacci/prior resistance).

 

The March nonfarm payrolls report released Good Friday showed 178,000 jobs added — triple the 59,000 consensus. Unemployment ticked down to 4.3%. Average hourly earnings rose just 0.2% monthly and 3.5% annually — the lowest annual reading since May 2021.

The market was closed and couldn’t react, but futures slipped about 0.2% as Treasury yields jumped ~3 basis points to 4.35%. A strong jobs report in this environment reinforces the higher-for-longer rate thesis. Schwab’s analysis noted that the data “shouldn’t change the Fed’s near-term plans” and the expectation remains an “extended pause.” Monday’s open (April 6) will be the market’s first chance to fully price this report.

 

The intermarket picture paints a stagflationary backdrop: 10-year Treasury yield at 4.31%, gold at $4,702, oil above $113/barrel, and the dollar strengthening. Rising commodity prices alongside elevated rates and a strong dollar is the classic stagflation cocktail that compresses equity multiples.

A notable divergence: the S&P 500 Equal Weight Index was recently down only ~1% year-to-date versus the cap-weighted S&P being down nearly 5%. This tells us that the mega-cap tech names that led the rally are now being sold hardest, while the average stock is holding up better — a sign of rotation, but also of concentration risk unwinding.

 

BOTTOMING CHECKLIST

INDICATOR	STATUS	SIGNAL
VIX Spike Above 30	✅ MET (31.05)	Bullish
End-of-Day Absorption Buying	✅ MET (3/30)	Bullish
McClellan Higher Third Bottom	✅ MET	Bullish
Explosive Reversal Day (2.9%)	✅ MET (3/31)	Bullish
200-Day MA Reclaimed	❌ FAILED	Bearish
Breadth Thrust (>50% above 50-day)	❌ NOT MET (28%)	Bearish
Offensive Sector Leadership	❌ NOT MET	Bearish
RSI Oversold Washout (<25)	❌ NOT MET (45.7)	Neutral
VIX Above 40 (Extreme Fear)	❌ NOT MET (35.3 high)	Neutral

Result: 4 Bullish / 3 Bearish / 2 Neutral — The evidence is genuinely split, which is why this market is so difficult to trade.

KEY LEVELS TO WATCH

LEVEL	PRICE	SIGNIFICANCE
200-Day MA	~6,640–6,690	Must reclaim for bull case
50-Day MA	~6,789	Next major resistance
Line in the Sand	6,550	Broken support, now resistance
VIX Spike Low	6,340–6,370	Tradeable low from 3/27–30
Fibonacci 38.2%	~6,170	Next major downside target

What It Means

The VIX spike to 31, the absorption buying on March 30, the McClellan higher-low pattern, and the explosive 2.9% reversal on March 31 all suggest that 6,340–6,370 may represent a tradeable low. The fear flush was real. Sellers were exhausted, at least temporarily.

But tradeable and durable are different things. The 200-day moving average rejection is the dominant technical signal. Breadth is anemic at 28%. Sector leadership is defensive. RSI never reached deep oversold territory. And the 2025 analog — where the S&P bounced to the 200-day, failed, and continued lower to the ultimate bottom — is an eerily close match to what we’re seeing now.

The geopolitical wildcard remains the only factor that could override the technicals. A genuine ceasefire or Hormuz resolution would trigger the kind of explosive, gap-up rally that overwhelms supply at the 200-day. Evercore’s Emanuel has a year-end target of 7,750, projecting a 22% rally from here, contingent on a “policy breakthrough” on Iran. That’s conceivable but not assured.

Monday’s open (April 6) is critical. The market must absorb: (1) the 178K jobs report (higher-for-longer implications), (2) Trump’s escalatory language about striking Iranian infrastructure, (3) oil above $113, and (4) three days of headline risk over the Easter weekend. Any gap-down that holds above 6,340 would reinforce the tradeable low thesis. A gap-down through 6,340 puts the Fibonacci target of 6,170 squarely in play.

Until the S&P reclaims the 200-day moving average (~6,640–6,690) on a weekly closing basis with breadth expanding above 50% of stocks over their 50-day, I would treat any rally toward that level as a sell-into-strength opportunity, not a buy-the-bottom signal.

“Don’t dream what you want to do. Do what you dream. Living is about memories, not dreams. There is always room for another good memory.”

Sources: FRED (St. Louis Fed), Advisor Perspectives, StockCharts (David Keller, CMT), StreetStats, CNBC, Bloomberg, Schwab Market Update, Trading Economics, McClellan Financial Publications, CBOE, Investing.com, MarketBeat, Motley Fool, FinancialContent, OneUpTrader, BBN Times.

This analysis is for informational and educational purposes only. It does not constitute investment advice. Past performance is not indicative of future results. Always consult a qualified financial professional before making investment decisions.