The S&P 500 has struggled to break decisively above 7,800, and technical analyst Frank Cappelleri sees a setup that resembles the lead-up to the market's two largest recent corrections. He says the similarities do not guarantee another significant decline, but they deserve attention.
The S&P 500 has struggled to break decisively above 7,800 since first reaching that area in late July, according to CNBC Pro contributor Frank Cappelleri of CappThesis. Along the way, the index has repeatedly tested its rising 50-day moving average while a negative momentum divergence developed.
Cappelleri points to the 14-day RSI, which has been making lower highs since peaking in May. He adds that negative divergences alone do not necessarily lead to immediate declines.
Two earlier setups ended in sharp declines
However, Cappelleri says similar technical conditions developed ahead of the market's two largest corrections over the past year and a half. The first ran from late 2024 into early 2025, when the index tested its rising 50-day moving average as negative RSI divergences developed. Subsequent breakout attempts failed, preceding the sharp decline associated with the tariff tantrum.
A similar sequence unfolded in late 2025. Momentum deteriorated as the index tested its rising 50-day moving average and struggled to break above 7,000. Those failed rallies eventually gave way to a correction of approximately 10%, accompanied by the Iran conflict.
Bearish patterns have failed before
Today, Cappelleri sees a familiar combination: repeated tests of the rising 50-day moving average, difficulty sustaining a breakout above 7,800, and persistent negative momentum divergences. He says the catalyst matters less than the market's reaction, and that repeated failures of bullish patterns can eventually give way to a successful topping formation, potentially leading to a more meaningful decline.
A potential bearish formation has taken shape, he says, and additional downside follow-through would complete the pattern. Yet Cappelleri notes that the uptrend since the March lows has been characterized by multiple bearish patterns that ultimately failed, with buyers consistently stepping in just when the technical picture looked its worst.
Source: CNBC
Trading involves risk.
Risk Disclaimer
