One chart shows why the stock market could be headed for another period of intense volatility

Business Insider

29-04-2025

Breadth thrust buy signals? Check. A collapse in volatility? Check.
To many chart readers, it seemed like the latest technical signals were pointing to a fresh and lasting upswing in the stock market — but not so fast.
The S&P 500 is approaching key resistance levels that could unleash a wave of selling and increase volatility in the near term.
Since the benchmark index rallied 14% from tariff-induced lows earlier this month, it is fast approaching its declining 50-day moving average and 200-day moving average.
When the stock market is in a downtrend, as it has been since it made a series of lower highs and lower lows in March and April, the declining moving averages typically represent a level where sellers can overwhelm buyers, driving stock prices lower and extending the downtrend.
"We favor the 200-day average as a gauge of the market's primary trend," Ari Wald, head of technical analysis at Oppenheimer & Co., told Business Insider on Tuesday. "It often serves as support in uptrends and resistance in downtrends."
As of Tuesday afternoon, the 50-day moving average of 5,613 represents 1.2% upside from current levels, while the 200-day moving average of 5,746 represents 3.6% upside.
But from there, it will likely be a tougher hill to climb for the stock market.
"The key question we're focused on is whether the first-quarter weakness was simply a sharp correction within an ongoing bull cycle, or the start of a more extended consolidation following a meaningful trend break," Wald said.
"We lean toward the latter view, and believe the risk/reward profile becomes less attractive as the S&P 500 approaches its 200-day moving average," He added.
Katie Stockton, founder of Fairlead Strategies, highlighted the 50-day moving average as a key resistance level to watch in the coming trading days.
And she thinks the stock market will be able to break above it.
"Our market internals are supportive of a bigger rebound," Stockton told clients in a note on Monday. "Sentiment has recovered meaningfully per the Fear & Greed Index, which is back above 25% after becoming deeply oversold earlier this month."
However, according to Stockton, a break above the S&P 500's 50-day moving average would likely be short-lived and ultimately give way to renewed weakness.
"Both the SPX and Nasdaq-100 Index have room to initial resistance at their 50-day MAs, respectively 5625 and 19680, breakouts above which would likely foster additional momentum before the rally fails," she said.
Big stock market catalysts ahead
As to what could cause a new wave of selling in the stock market, it could be investors' reaction to a flurry of upcoming data.
Investors will get a first glimpse at first-quarter GDP on Wednesday along with an update to the Fed's preferred inflation gauge. Those data points will by followed by the April jobs report on Friday. On May 7, investors will hear from Jerome Powell at the Federal Reserve's next policy meeting, which could include a shift in the central bank's view of interest rates.
In between all of the macroeconomic updates, first-quarter earnings season will be in full swing, with most mega-cap tech giants set to report results in the next few days.