S&P 500 Bear Market Targets
The Ivory Hill RiskSIGNAL™ remains green, confirming that pullbacks are buying opportunities. Our short-term signal is also green while our mid-term volatility signal has turned red—often an early warning of larger moves ahead.
There are a lot of reasons to be bullish in the short term.
Market makers are positioned long gamma, suggesting a period of lower volatility. In this positive gamma environment, option dealers adjust their hedges by selling futures as prices increase and buying futures as they decline. This dynamic helps dampen price swings, contributing to market stability and reduced volatility.
Short-term trends are bullish, as the SPX and QQQ have finally broken out of their respective triangle consolidation patterns, which had been established roughly three months ago. Both SPX and QQQ made new all-time highs this week.
The Equal-Weighted S&P 500, Dow Jones Transportation Average, Dow Jones Industrial Average, and Russell 2000 have yet to confirm the breakout observed in the S&P 500 and Nasdaq 100. It may take additional time for these indices to follow suit or they are telling us a different story.
The sharp rise in CapEx among major tech firms signals a bullish outlook for AI and the broader tech sector. With Amazon (+143%), Meta (+135%), Alphabet (+107%), and Microsoft (+76%) ramping up spending, it's clear they are aggressively expanding AI infrastructure, cloud computing, and data centers. This level of investment highlights strong conviction in the future revenue potential of AI-driven products and services, reinforcing sustained demand for AI processing power and benefiting chipmakers and cloud providers. Big Tech’s commitment to scaling AI capabilities suggests the sector is poised for continued dominance and exponential growth.
As of today’s close, five of the seven Magnificent 7 stocks have regained their upward trend, signaling strength in tech and a bullish outlook for the broader market.
I expect the chart below of Technology Select Sector SPDR ETF to turn bullish as long as the M7 stocks continue to turn up.
Our financials sector bet has been paying off this year, with the Financial Select Sector SPDR Fund (XLF) reaching new all-time highs. We remain bullish on XLF, expecting it to be a top-performing sector as Trump’s deregulation efforts gain traction.
We're still holding our BTC position, which remains relatively flat YTD. However, I expect the macro reflationary environment to shift in March, potentially providing a boost to the crypto market. If that doesn’t materialize, we’re prepared to exit the position if we see further deterioration in the rate of change or a breakdown below the 91,615 support level.
Subscriber Question of the Month
I appreciate when clients and subscribers ask thoughtful questions based on my analysis. In my experience, if one person has the confidence to ask, many others are likely thinking the same thing.
Following last week’s report, a subscriber, who is also a financial advisor from California, asked about the February Market Multiple (MM) Chart update in last week’s report, specifically regarding the large gap between the S&P 500’s current MM target (5,670) and the worse-if scenario target (4,550). I’ll post the chart below for reference.
The question centered on whether investors should expect a sharp decline to the lower target or if the market would find support along the way in the event of a 2025 bear market. I will cover the details of the answer below.
Key Technical & Fundamental Signals
Measured Move Target Reached – The S&P 500 exceeded its 6,055 measured move target from the 2022 bear market in late 2024, historically a sign of waning bullish momentum.
Loss of Bullish Momentum – A bearish divergence between the S&P 500 and its weekly RSI emerged in 2024 and remains intact into early 2025, reinforcing signs of market exhaustion.
Technical and Fundamental Targets Align – The 4,550 worse-if target from February’s MM update aligns closely with the 38.2% Fibonacci retracement level (4,636) from the post-pandemic rally. Meanwhile, the 23.6% Fibonacci retracement level (5,203) corresponds with key pivot points in 2024, where the S&P 500 topped in late March before bottoming during the August pullback.
If the S&P 500 breaks below 5,670, we will likely be raising cash before that level is breached. However, even for long-term investors, it would be highly advisable to significantly reduce equity exposure if that level is breached.
Bear Market Support & Downside Targets
If equities decline significantly, bids are likely to emerge between 5,000 and 5,200 in the S&P 500, as this zone previously acted as both support and resistance. The 5,200 level played a crucial role in Q1 2024, where the index stalled before a 6% pullback in early Q2, and it provided support during the July-August 2024 decline. Additionally, 5,200 coincides with the 23.6% Fibonacci retracement, reinforcing its importance as a technical pivot.
On the downside, the worse-if MM target of 4,550 is closely aligned with the 38.2% Fibonacci retracement (4,636), which sits just below the early 2022 record highs. If a bear market unfolds in 2025, the 4,550–4,800 range would be a key area to monitor for potential bottoming.
Tactical Considerations
Market Multiples targets are not confined to a single month, and a 25% decline in 30 days would resemble a panic-driven collapse, akin to the COVID-era selloff. Instead, these targets serve as long-term support and resistance levels in a sustained downturn.
If a bear market materializes, history suggests strong relief rallies off key technical levels such as 5,000, 5,200, and lower retracement zones. However, in a severe downturn, these levels should be treated as downside targets rather than buy-the-dip opportunities. Instead, relief rallies could provide strategic moments to reduce long exposure, preserve capital, and hedge against further downside risk.
And remember - The one fact pertaining to all conditions is that they will change.
Best regards,
-Kurt
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Kurt S. Altrichter, CRPS®
Fiduciary Advisor | President
Email: kurt@ivoryhill.com | ivoryhill.com