Mind the gap on the S&P 500

The S&P 500 (SPX) has turned sloppy entering 2026. Despite starting the year with solid breadth, the index failed to sustain a breakout from a late October through late December / early January bullish consolidation pattern.

“To tariff, or not to tariff, that is the question.”

Volatility tied to President Trump’s rhetoric around tariffs and a potential deal involving Greenland dominated the past two sessions. Tuesday’s (1/20) sharp selloff and Wednesday’s (1/21) equally sharp rebound highlight how sensitive the market remains to policy headlines.

Tuesday’s decline broke initial support at 6824 (the early January low). Wednesday’s rally reversed that move, pushing the SPX back above 6824 and into the large daily downside gap from 6871 up to 6925.

For the SPX to suggest that Trump’s tariff threat marked an interim low at 6789, the index must close above this gap. Notably, the gap coincides with the zone of the 13-, 26-, and 40-day moving averages (DMAs), which span from 6861 to 6918. Reclaiming these DMAs is required to restore the tactical uptrend.

On a bigger-picture basis, the mid-2025 breakout on the weekly chart still projects upside into the 7400s (see Chart 2).

Failure to fill the gap and reclaim the DMAs would leave the SPX vulnerable to a retest of the mid-December low near 6720.

More important support for 2026 resides at the late November “post-NVDA earnings” low and the early October “Trump tariff tweet” low in the 6550–6521 range.

Rising 26- and 40-week moving averages near 6690 and 6446, respectively, reinforce these support levels and continue to reflect a bullish trading cycle for the SPX despite the recent turbulence.

Chart 1: S&P 500: Daily chart

Chart 2: S&P 500: Weekly chart