S&P 500 Tests Key Levels as Oil and Metals Face Major Breaks

The S&P 500 Index (SPX) is sitting at an important decision point. On the weekly chart, we have a small bear flag forming. It is not the strongest version of the pattern because the initial decline was not a wide range red candle, but the structure still fits. The market reversed from the low and has been moving sideways inside the range of that original drop.

The first level I am watching is 7,620. As long as the S&P 500 stays below 7,620, the bear flag remains active, even if we get a short-term bounce early in the week. A confirmed move above 7,620 would change the structure and could create a much larger breakout.

There is also a bigger issue developing when we compare the S&P 500 with the U.S. M2 Money Supply (M2). When the index is divided by the money supply, the ratio has reached the same area seen near the peak of the dot-com bubble. That creates what looks like a major double top between that earlier valuation peak and where the market is today.

That does not mean the market has definitely topped. One signal is never enough by itself. But it does raise a warning because the S&P 500 has returned to the same valuation relative to the money supply that we saw during one of the most extreme periods in market history.

At the same time, the market still has meaningful support below it. A long-term parallel trend line beginning at the 2020 low connects several major pivot lows. Price briefly moved through that line more than once, but it never confirmed a sustained breakdown. The S&P 500 later broke above the upper part of that channel, rallied to an all-time high, and then returned to test the breakout area.

That leaves the market caught between support underneath and major valuation resistance overhead. The question is which side breaks first.

If the S&P 500 confirms above 7,620, the market could eventually squeeze toward 10,000. Supporting trend lines would move above 8,000 within several months, approach 9,000 in roughly one year, and reach around 10,000 in about a year and a half. There would still be corrections along the way, but a clean breakout could create the conditions for a final acceleration higher.

The downside level is 7,350. A confirmed break below 7,350 would suggest that the recent breakout from the larger channel has failed. The first major area below would be around 7,000, followed by 6,300. If selling continues, the index could eventually return to the lower boundary of the broader parallel channel.

West Texas Intermediate Crude Oil Futures (CL) are also at an important technical area. Oil pushed through resistance created by earlier lows and reached the 50% Fibonacci retracement of the previous decline. That level lined up with a downsloping trend line that price pierced several times with wicks but never confirmed above.

The combination of the 50% retracement and the trend line created major resistance. A short position was established at an average price of approximately $90 per barrel, and oil began pulling back from that area on Friday.

Reduced military activity between Iran and the United States could add more pressure. If there is no renewed firing before the next market open, oil could open approximately $2 lower. That would support the bearish setup, although any renewed conflict could quickly change the direction.

Silver Futures (SI) remain below a major resistance zone. The first level that matters is $64 to $65 per ounce. Silver previously broke an important support line below, returned to test it from underneath, and was rejected. That former support is now acting as resistance.

The broader silver cycle is also showing similarities to the 2011 cycle, with the current cycles appearing to condense. For now, the outlook remains neutral to bearish while silver stays below $64 to $65. A confirmed move above $65 would open the door to further upside. Until then, additional downside remains possible.

Gold Futures (GC) are trading inside a very tight wedge that is expected to close around August 14. That means a decisive move is approaching.

A confirmed breakout above the wedge could send gold toward approximately $4,500 in the near term and potentially begin the next major bullish move. A confirmed break below the wedge would instead increase the probability of a decline toward approximately $3,500.

The S&P 500, oil, silver, and gold are all approaching levels that could define their next major moves. This is not the time to guess ahead of the market; it is the time to remain patient, respect the levels, and let price confirm the direction.