S&P 500 Trendlines to Watch as Bulls Remain in Control

“There is potential resistance overhead from the lower boundary of the bull channel that was in place from June through mid-November.…the sentiment landscape has changed in favor of the bulls as of the pre-Thanksgiving close, considering the three factors below:

1. The SPX is back above key short-term moving averages with a V-rally from the mid-November low
2. The 10-day buy (to open) put/call open interest ratio on SPX components at its highest level since early September, and
3. A short interest “explosion” higher in the first half of November, and many of these shorts already underwater” 
   
   -Monday Morning Outlook, December 1, 2025

Bulls maintained control in the first week of December, as the “V” rally from the key in September and October continues. Last week’s S&P 500 Index (SPX--6,870.40) advance was orderly, with the lower boundary of the June-November bull channel acting as resistance. But because it is rising daily, such resistance levels are will soon be at higher levels. For example, today the trendline is sitting at 6,893 and at the end of the week it will be at 6,925. Note that today the site of the lower boundary of this bull channel is in the vicinity of the late-October high before the 5% pullback into mid-November.

With the last FOMC meeting of the year looming mid-week and a 25-basis point cut nearly fully baked into the market -- Fed Funds Futures traders assigned an 87% probability of a rate cut as of Friday’s close -- one has to be cautious in the near term, with the SPX trading nearer to potential resistance than support levels. The big levels to watch in the short term are 6,890, or the October closing high and just above the round 6,900 century mark.

If the SPX moves through these levels, the next big one to watch is the 7,000-millenium mark. Not only will this have psychological importance, but it is the strike that is part of the J.P. Morgan quarterly collar trade. In other words, a lot of sold calls are sitting at quarterly expiration SPX 7,000 strike, which means buyers of those calls on the other side of this trade and typically hedge will short an increasing number of S&P futures as the SPX moves up to that key strike until year’s end.

The 30-day and 50-day moving averages are potential support levels on a pullback, but if this market proves to be in a volatile range, the significance of these moving averages is downgraded and it becomes more about prior lows, such as the 6,550 level that marked lows in September, October and November.

The sentiment backdrop tilts in the bulls’ favor, with multi-year highs in short interest on SPX components and, per the chart below, the 10-day SPX components buy (to open) put/call volume ratio rolling over from a multi-month high. As such, with more call buying relative to put buying, equity option traders could be supportive in the days ahead as they become more optimistic but are not at an extreme in optimism as they were when the SPX peaked in late October.

A group that could ruin an upside breakout is active investment managers. According to last week’s National Association of Active Investment Manager’s (NAAIM) survey, active investment readers are fully invested. The last time they reported being fully invested was late October, ahead of the 5% slide and as they reduced net long positions by 15 percentage points. This group represents a risk to the anticipated breakout if they become sellers again with the SPX near its late-October high.

Regardless, the bulls remain in control, especially as there is more short covering potential and more cash to put to work relative to late October when the SPX was trading around Friday’s close. If the 6,550 level breaks, we’ll re-evaluate.