A Big S&P 500 Pullback Isn't Far-Fetched. What the Market Is Telling Us. -- Barrons.com

By Doug Busch

I believe the S&P 500 could finish September in the 7500 area, reflecting a modest pullback from current levels as investors contend with a combination of elevated uncertainty and historically poor seasonality.

This month has consistently been one of the weakest months for equities, with the S&P 500 averaging roughly a 1.1% decline over the long run, and I think that seasonal headwind could weigh on the market again this year.

While strong corporate earnings and continued enthusiasm around AI provide fundamental support, I expect the market to remain vulnerable to bouts of volatility as investors reassess interest-rate expectations, inflation, and the broader macroeconomic outlook.

My expertise is in the technicals, so rather than relying solely on the macro narrative, I want to turn to the charts to see what the market itself is telling us. Looking at the daily, weekly, and monthly charts provides a broader perspective. These time frames together will support my thesis that the S&P 500 could see a temporary pullback toward 7500 before resuming its longer-term uptrend.

Looking at the daily chart, the ratio chart against the Nasdaq has lagged since late July. Round number theory came into play at 7000 with a break above a 6962 double bottom trigger on April 14. Notice near the lows of that base were three doji candles between March 23 and March 25, followed by a bullish morning star pattern completed on the last day of the first quarter, which surged 3% and reflected some window dressing.

A failed breakout in late July above a bull flag near the 7500 level reversed higher in early August, but it ultimately failed to gain any real traction. More recently, the benchmark has scored five consecutive closes at the lows for the daily range. This persistent selling pressure clearly signals that institutional sellers are currently in control.

The index now sits 3% below its all-time highs. Another 2% move down from here would represent a garden-variety 5% selloff down to the 7500 level, which could serve as support before a potential fourth-quarter rally transpiring later in the year.

Looking at the weekly structure, 7500 stands out as the primary logical destination. A key warning sign here is the bearish RSI divergence, where the RSI formed a lower high while price reached higher highs in May and July, pointing to underlying momentum loss. Meanwhile, volume has tailed off during the summer doldrums, but it should pick up in earnest now with the Fed meeting later this week.

Despite these warnings, give the S&P 500 credit for shrugging off the weekly doji candles, which typically signal exhaustion. The index previously managed a strong nine-week win streak through most of April and May within that broader bull flag structure. If the 7500 level is retested on this move, that former ceiling is likely to transition into a solid floor of support.

Looking further back, round number theory played a major role when a bullish piercing line candle formed at 5000 last April off the rising 50-week simple moving average. That key bounce laid the foundation for the uptrend currently in play.

Focusing on the monthly chart, several doji candles emerge as a concern if the index trades down toward 7500 and fails to hold that area in the near term. These include four consecutive doji candles between last November and this February, alongside two more in June and July. If that 7500 support level gives way, which remains a low-probability scenario, the index could ultimately pull back toward the 7000 region by early 2027.

However, the S&P 500 deserves credit for holding above the overbought 70 RSI level for most of the past two years, demonstrating exceptional underlying strength. A notable monthly doji in April 2025 successfully retested the former December 2023 cup-with-handle breakout off the rising 50-month simple moving average, launching a powerful seven-month win streak.

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.

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September 14, 2026 15:40 ET (19:40 GMT)