S&P 500 Flashes Rare Pattern, But Market Signals Remain Divided

April brought an unusual twist to the U.S. stock market. The S&P 500 plummeted more than 10% during the month, only to rebound and close within 2% of where it began.

According to technical analyst Subu Trade, this rare combo has only happened five times since 1926 — and each time, a deeper correction followed. Historically, the index dropped an average of over 15% within a year of such an occurrence.

As of May 6, the S&P 500 sat at 5,650 points, dipping 0.64% on the day and breaking a nine-session winning streak — its longest in two decades. The broader index remains down nearly 4% for the year.

Still, interpreting this setup isn’t straightforward. While the historical pattern suggests caution, it’s worth noting the last time this signal flashed was in 1938 — in a vastly different economic landscape.

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Today’s market is supported by strong momentum in tech stocks and some bullish technical indicators, including a recent Zweig Breadth Thrust — often a sign of a rally forming.

However, headwinds remain. Trade tensions, a disappointing GDP report, and policy uncertainty — including unusual proposals like tariffs on streaming content — have rattled sentiment. At the same time, Wall Street has started to revise its S&P 500 outlook for 2025 downward, reflecting increased caution across institutional desks.

For now, traders are being advised to watch for clearer confirmation before betting on a bearish move, as conflicting signals keep the outlook murky.

Alexander Stefanov