What Technically Speaking the Stock Market is Struggling, and 2 Key Charts to Watch to Play
The stock market keeps struggling like a coin flip, as the Trump administration's one-day-one-comment approach sends markets up and down. Assets jump when Trump brags about a trade deal, and fall when stalled negotiations lead the President to escalate. In this environment, technical analysis speaks more clearly than headlines, reflecting what the invisible hand thinks of the broader picture. While the market is trying to break out of the current bear trap, it still lacks momentum. Strong resistance, short-term support levels, and two key charts are what you need to watch to decide your next strategy on this bumpy road ahead.
Generally speaking, we are still in a technical bear market. The S&P 500 reached a record high in mid-February and then declined in a lower-high pattern, with short-lived bounces after waves of sell-offs, creating descending peaks. We can name the first two highs in this bear market as Top 1 and Top 2, as shown in the chart below. The S&P 500 was around 6120 and 5756 at Top 1 and Top 2, implying 14% and 7% above the index's close on Wednesday. These are critical resistance levels in the bear market. If the S&P breaks through Top 2, that could imply a strong reversal signal and turn the outlook more bullish. Breaking through Top 1 would signal even stronger momentum toward a new all-time high, potentially confirming the beginning of a new full bull market.
However, by the time investors decide to go all in once the S&P breaks through Top 2, it might be too late—and a fake breakout (just a brief push above before falling back) could be yet another bear trap. Realistically, if the outlook worsens again, we may be forming a Top 3, signaling a new round of aggregated sell-off.
So, we need to evaluate whether the current S&P 500 level is at a potential Top 3, another lower-high in the bear market that could imply further downside. First, we move to the support levels. The S&P 500 posted session lows on April 7 and April 21, which we can name Down 1 and Down 2, around 5000 and 5158, implying 7% and 4% downside from the current level. It's somewhat encouraging that Down 2 is higher than Down 1, indicating a potential bullish higher-low pattern.
However, the time span between Down 2 and Down 1 is much shorter than between Top 1 and Top 3, suggesting lingering bearish sentiment and pressure on the bulls. Meanwhile, rapid bounces can sometimes be considered dead-cat bounces, as investors rush in with FOMO, thinking the sell-off is over—only to cash out quickly after a short-term rebound (especially 0DTE option traders) or panic-sell if a deeper sell-off emerges.
The contradiction between lower-highs (Top 1 to Top 3) and higher-lows (Down 1 to Down 2) shows the market is struggling, with bearish forces still outweighing bullish ones. Fundamentally, Trump's tough and flip-flopping trade stance has left big funds lacking confidence in long-term investment, exaggerating the speculative environment. From a technical perspective, if the S&P 500 closes below Down 2, the breakdown of the higher-low pattern alongside lower-highs could form a double bearish signal, dragging stocks further down.
We can only analyze this month's S&P 500 performance to get clues. While short timeframes are noisy and often lack precision, they can still be predictive for short-term traders—especially retail investors. The index was capped throughout the month. On April 9, the S&P 500 posted its largest one-day gain since 2008, but the enthusiasm didn't last. It failed to break that cap multiple times afterward, showing that big investors remain cautious as no actual trade deal has materialized—just more bragging from Trump.
It's interesting that the S&P 500 nearly broke the cap (5460) on Wednesday, but intraday gains narrowed from 3.4% to a 1.67% close after Secretary of the Treasury Bessent and the White House denied rumors about significantly lowering Chinese import tariffs. For investors to truly turn bullish, the Trump administration needs to act, not just talk. Any bounce could be short-lived unless there's real evidence of improving U.S.-China relations or trade deals.
Therefore, from a short-term technical perspective, if the S&P 500 cannot break the cap and sustain it, any rally remains unreliable. If the index falls below Down 2—or worse, Down 1—a more pessimistic outlook is likely. Investors should remain cautious amid a bumpy road, given the broad bear sentiment and failed short-term bounces.
Beyond the S&P 500's technicals, investors must also closely monitor the following two charts to make better speculative investments.
Gold has been strongly inversely correlated with stocks recently, as investors turn to dollar-alternative safe-haven assets amid geopolitical tension and uncertainty in U.S. equities. A rising gold price implies rising anxiety over the U.S. outlook and signals further downside for stocks. It suggests a loss of confidence in the dollar and potential trouble for big tech under tariff pressure. For example, gold futures tumbled 4% on Wednesday morning (when the Nasdaq 100 jumped 3%), but gold's rebound later in the day was accompanied by a drop in U.S. equities—safe-haven demand warns that stock optimism may be misplaced.
The US 10-Year yield (US10Y) is another key benchmark, even if it now sits behind gold in significance. It was the main reason Trump delayed the reciprocal tariff announcement in early April. A rising yield reflects a weakening dollar and concerns that failed negotiations could prompt major players—like China and Japan, who hold large amounts of U.S. debt—to sell Treasuries as a threat. Higher yields signal deeper problems: a gloomier outlook and a potential erosion of the dollar's safe-haven status, which could further shake investor confidence in equities.