By Doug Busch

The S&P 500 index sits just 2% from its all-time high, yet bearish undercurrents are growing as we enter the late innings of 2025.

Strong earnings reports from names like Palantir Technologies, Advanced Micro Devices, and Meta Platforms have been met with soft price action. The ominous Hindenburg Omen, a rare technical warning that appears when market breadth bifurcates and many stocks hit highs and lows at the same time , has surfaced. This signal has appeared three times over the last week, the last time yesterday.

The Roundhill Magnificent Seven ETF recorded a bearish island reversal with a gap down on Oct. 30, following a gap up just three sessions earlier. If weakness spreads from these concentrated leaders, it could deliver a sentiment blow. Meanwhile, the U.S. Dollar Index's persistent rise, now testing a major round number of 100, could act as an additional headwind for equities.

The technicals speak for themselves. The chart of the S&P 500 shows a clear negative Relative Strength Index divergence. As RSI measures the velocity of price and trend, this signals a weakening uptrend and raises the possibility of a correction. The index is currently clinging to its 21-day exponential moving average, with the 50-day simple moving average not far below. The bearish filled candlestick from Oct. 10, following China tariff talks, still looms large. A small gap down on Nov. 4 recorded an island reversal, adding to the bearish narrative.

I assign a 30% to 40% probability of the S&P 500 entering a correction by year end. This correction, typically defined as a 10% drop from all-time highs, which would push the index back toward its 200-day simple moving average. There was a small gap down on Nov. 4, which qualifies as a bearish island reversal as well.

The S&P 500 was trading around 6730 Thursday.

Digging deeper into the S&P 500, the Equal-Weighted Index is up 7% year to date, while the S&P 500 itself has gained 15%. This disparity speaks to narrow participation and weak breadth, as fewer stocks are driving the market higher. The equal-weight chart also shows a bearish rounded-top pattern, and the 21-day exponential moving average has crossed below the 50-day simple moving average, forming a bearish death cross. The last time this occurred was in early March, leading to a sharp 6% pullback for the rest of the month. Support around 7500 is critical, and a break could trigger another rapid decline in prices.

The S&P 500 Equal Weighted Index was trading around 7590 Thursday.

Investors seeking to hedge their equity exposure might look to gold for protection. But this traditional risk-off play hasn't really worked in recent weeks. Volatile behavior often signals market tops, and gold recorded back-to-back bearish engulfing candles on Oct. 17 and Oct. 21 near the round $4400 per ounce level. This action formed a bear flag, and a move below $3950 could push gold toward $3500, retesting the breakout from the bullish ascending triangle in early September. Its 21-day exponential moving average is now sloping sharply lower and acting as resistance, a line gold has traded above for almost all of 2025. The weakness is also weighing on top miners like Agnico-Eagle Mines and Newmont, down 6% and 8%, respectively, over the past month. SPDR Gold Shares recently topped out at the round $400 level.

Gold was trading around $3990 Thursday.

Doug Busch is the senior technical analyst at Barron's Investor Circle. His technical view is added to stock picks, including those published exclusively for Investor Circle readers. A glossary of technical terms is updated regularly with new entries.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

November 06, 2025 12:31 ET (17:31 GMT)

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