The Nine-Week Win Streak Is Over, Here’s What the Charts Are Saying Now
Last week the S&P 500 reversed course after nine consecutive weeks of gains, as a Friday selloff in many semiconductor-related stocks weighed on the broader market. The index finished the week down about 2.5% overall, while the Nasdaq dropped 4.7%.
Bond Market Selloff Resumes
The recent bond market selloff regained momentum after a nearly two-week pause, as yields of U.S. government bonds rose in the wake of Friday’s better-than-expected jobs report. The steepest rise came at the short end of the yield curve, with the 2-year Treasury’s yield closing at 4.16% on Friday, well above the previous week’s closing yield of 4.00%.
Bond market trading reflected rising expectations for a U.S. interest rate increase by year end. Friday’s trading in rate futures markets implied a roughly 72% probability that the Fed would lift its benchmark rate by anywhere from a quarter-point to three-quarters of a point by December.
Bitcoin Hits Lowest Level Since September 2024
Bitcoin fell for the fourth week in a row as the price of the most widely traded cryptocurrency tumbled to the lowest level since September 2024. As of Friday afternoon, Bitcoin was trading around $60,000, down nearly 18% for the week. The cryptocurrency is well below a recent peak of around $82,000 reached on May 10 and a record high of $126,000 set last October.
Oil Remains Volatile
The latest developments in the Middle East conflict continued to buffet oil prices. U.S. crude traded in a wide range, briefly climbing above $96 per barrel on Wednesday before settling to around $90 on Friday afternoon. For the week, oil was up nearly 4%.
My Technical Read: One Day Does Not Make a New Trend….But Watch Closely
Friday’s sharp declines may have broken the back of the current sharply rising trends in most major indices. However, downside follow-through will be necessary to indicate that a new downtrend may have started, as one day does not a new trend make.
The sharp thrust downward we experienced Friday could be just the tip of the iceberg, but next week’s price action may be critical in assessing the trend going forward. It is likely that extreme volatility may be ahead, and this makes intelligent stop losses imperative. In my weekend webinar I indicated how many stocks are at or even a bit below key support levels. If these levels get taken out we could see even more substantial declines.
The current McClellan Oscillator reading sits at -28, which is nowhere near extremely oversold. We will likely need to see a reading closer to -160 to -180 or deeper, and an intraday TICK index near -1,300 to -1,500, to indicate the kind of extreme oversold levels from which rallies are born.
Key SPX Technical Levels to Watch
Support near 7,330-33, then 7,175 and 7,050. Resistance lies near 7,460-65 and 7,495-7,500.
In any case, as we always do at TheTechTrader.com, we will “Trade What We See, Not What We Think.
— HARRY BOXER, THE TECHNICAL TRADER | www.thetechtrader.com
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