Is a market top forming?
The S&P 500 continues to range between 6,800 and 7,000, but the technical picture has weakened: the index is trading below key moving averages and momentum is fading. At the same time, the Magnificent Seven are no longer leading, as capital rotates into other sectors — particularly energy, which is showing notable strength.
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Key points
- A lack of momentum in the S&P 500 forces us to consider the possibility of a market top.
- The Energy sector is showing strong upward momentum.
- Gold and Bitcoin are in consolidation, which way next?
Quick Recap: Last Week
Last week, we noted a slight "risk-off" sentiment in the markets. The initial rally in the S&P 500 had stalled due to persistent weakness in the tech sector, and the crypto markets had experienced a sharp drawdown. Consequently, the best investment opportunities appeared to lie outside the United States.
We summarized our outlook with three main points:
- The S&P 500 continues its sideways chop, but we see sustained uptrends outside the Magnificent 7.
- International markets are outperforming the US.
- The crypto downtrend continues, BTC touches the $60,000 level.
S&P 500 topping?
Last week, we wrote that the S&P 500 was chopping sideways between 6,800 and 7,000 points. Over the past week, this status quo has held, and the consolidation has yet to resolve into a clear uptrend.
In a trendless market environment, which has characterized the entirety of early 2026, interpreting price action is notoriously difficult. We are holding off on drawing definitive conclusions for now. We expect the next clear directional signal to emerge only when the aforementioned 6,800–7,000 range breaks one way or the other.
With those caveats in place, we must note that right now, we see more signs of weakness than strength in the S&P 500. The index has once again turned lower from just below 7,000 and has dropped beneath both its 20-day and 50-day moving averages.
Concurrently, the Relative Strength Index (RSI) continues to print lower highs and lower lows. Under a strict technical interpretation, the RSI dropping below 40 and a subsequent peak failing to breach 60 could already meet the criteria of an emerging downtrend. We aren't making that strong of a conclusion just yet, but it’s worth making clear that the S&P 500's current price action certainly does not look bullish.
The reason for the S&P 500's lack of upward momentum isn't hard to find. The Magnificent Seven, which acted as the market's primary engine from 2023 to 2026, has turned into an outright drag on the broader index.
Over recent weeks, the MAGS ETF (which tracks these mega-cap tech stocks) has continued to make lower highs and lower lows, while the XMAG ETF (which tracks the S&P 500 excluding the Mag 7) has continued to make higher lows.
Two weeks ago in our Pulse newsletter, we noted that the equity market was bifurcating. This divide has only deepened since then. The Magnificent Seven and the AI-threatened software sector have been severely weak, whereas nearly the entire rest of the equity market has performed quite strongly.
Last week, we pointed out that this kind of sideways stagnation in the S&P 500, coupled with capital rotating out of the tech sector that led the rally and into more defensive sectors, is often textbook market-topping behavior.
When combining these observations with the S&P 500's continued weakness over the past week, we are forced to seriously consider the possibility that we are approaching some form of a market top, at least a local one.
This remains a hypothesis, and we are monitoring the situation without jumping to aggressive conclusions. If we see the S&P 500 break below 6,800, it would significantly validate our bearish thesis. Conversely, a breakout above 7,000 would safely allow us to dismiss these worries.
The evidence we see right now gives us more reason to expect the former rather than the latter, but the situation can, of course, change quickly.
If the broad indices are treading water and the tech sector is lagging, what is working?
In our early 2026 analyses, we have highlighted the Energy sector as one of the most compelling themes right now. We see clear relative strength across this sector, encompassing both traditional fossil fuels and newer forms of energy.
As an interesting vehicle for this exposure, we highlight the Amundi MSCI New Energy ETF (Ticker: LYM9). This fund, which invests in alternative energy sources alongside new energy storage and distribution technologies, is in a long-term uptrend and recently broke out of its late-2025 consolidation phase early this year.
Geographically, we are particularly interested in the European energy sector. In a shifting global landscape, the geopolitical significance of energy has reached a whole new level, and many believe Europe has significant catching up to do in this regard. This makes the European energy sector a highly attractive investment proposition, and the iShares MSCI Europe Energy Sector ETF (Ticker: ESIE) is indeed in a very strong uptrend.
Gold in Consolidation
If the S&P 500 is trading sideways, so too is gold, which has emerged as a hot asset class over the past year. Following the bubble-like price action and subsequent pop seen in late January, gold has been grinding in a trendless consolidation around the $5,000 mark.
However, gold remains in a secular bull market, and our base case is that we will see higher prices once this consolidation phase resolves. That said, gold's ascent over the past year has already been dramatic, which is why we wouldn't be surprised by more subdued price action in the near term.
A break above $5,100 would signal the start of a new leg up. Until we see that, we are keeping our immediate expectations for gold relatively cautious. The distance to this milestone is only about two percent.
Bitcoin Resuming its Downtrend?
Last week, we noted that the crypto market was recovering from the flash crash seen in early February. We assessed the bounce up to that point as looking quite weak, forcing us to prepare for the possibility that the downward move hadn't yet concluded.
A week later, this interpretation has strengthened. The immediate bounce in Bitcoin pricefrom the $60,000 bottom stalled out at around $72,000, and subsequent attempts have failed to breach this level.
After violent price swings, charts often leave behind large "pockets" where price action provides little actionable information. For Bitcoin, such a pocket has formed between $60,000 and $72,000. Until this range breaks decisively in either direction, we are refraining from taking a high-conviction view. However, until $72,000 is cleared, our primary expectation remains a continuation of the downtrend.
For much of the past week, financial markets have been defined by consolidation. Equity indices, gold, and Bitcoin have all been trading without a clear trend.
Often, these temporary periods of equilibrium precede major moves in one direction or the other. Therefore, we wouldn't be surprised to see volatility pick up and larger moves materialize over the next couple of weeks.
Whatever happens, we will be monitoring the situation closely and keeping you updated, so stay tuned!
The information and sources presented are for illustrative purposes only. While obtained from sources deemed reliable, their accuracy cannot be guaranteed.