S&P 500 Hits 7,000 Then Stumbles: What Traders Should Watch Now

The S&P 500 flirted with the 7,000 mark last week, a milestone that sounds like a headline from a sci-fi novel but is very real in 2026. The index hit this record high only to pull back by about 0.56%, leaving traders wondering if the rally has legs or is gasping for air. The late-week selloff coincided with a broad liquidation that dragged gold and silver down, with silver’s AGQ ETF imploding 65% in a single session thanks to algo chaos rather than fundamentals. The market’s mood is jittery, and with the labor market showing cracks beneath the surface, the S&P’s next moves could set the tone for equities this quarter.

The S&P 500 hit a new all-time high last week, surpassing 7,000 points for the first time ever, according to Seeking Alpha’s report on February 1. However, the euphoria was short-lived. By the end of the week, the index had retreated about 0.56% from that peak, signaling a reality check for investors. This pullback came amid a systemic, algorithm-driven liquidation that hammered precious metals alongside stocks. Silver’s AGQ ETF plunged an eye-watering 65% in one session, a move detached from any fundamental news but symptomatic of fragile market internals.

Meanwhile, the broader equity market showed signs of fatigue. Energy stocks outperformed, but the momentum was waning, and technical cracks were emerging. The labor market, often a bellwether for economic health, is showing signs of weakness despite official unemployment rates holding steady at 4.4%. This discrepancy raises questions about the sustainability of the equity rally.

The S&P 500’s flirtation with 7,000 is a significant psychological and technical milestone. Historically, such round-number milestones attract both speculative fervor and profit-taking. The current backdrop is complicated by mixed signals from the economy and central banks. The Federal Reserve, under new leadership with Kevin Warsh’s nomination, is expected to thread a needle between cutting short-term rates and shrinking its balance sheet. This balancing act creates uncertainty for equities.

Cross-asset behavior is telling. Gold, often a safe haven, was caught in the liquidation frenzy, trading around $446 per ounce with negligible net change but high intraday volatility. The weakness in precious metals alongside stocks suggests a broad risk-off episode triggered by algo-driven selling rather than a fundamental shift. Bonds and volatility indices have been relatively stable, indicating that institutional players might be waiting on clearer signals before committing.

The labor market’s underlying weakness, despite a stable headline unemployment rate, suggests that the economy might not be as robust as the equity market prices imply. Historically, when labor market cracks precede equity peaks, the result is often a correction or at least a period of sideways trading.

The real story is that the market is caught between a rock and a hard place. On one side, the Fed’s pivot to rate cuts should theoretically fuel a risk-on environment. On the other, the underlying economic data, particularly labor market dynamics, are softening. The algo-driven liquidation in silver and gold ETFs is a symptom of overstretched positioning and fragile liquidity rather than a fundamental sell signal.

Institutional investors are likely cautious. The S&P 500’s record high is impressive, but the lack of follow-through and the quick pullback suggest profit-taking and risk management are in play. Retail investors, meanwhile, might be caught up in the hype of new all-time highs, potentially setting the stage for a classic “buy the rumor, sell the news” scenario.

The divergence between headline unemployment and underlying job creation points to a labor market that is stabilizing but not strengthening. This nuance matters because equity valuations often hinge on growth expectations. If job creation falters, consumer spending and corporate earnings could disappoint, putting pressure on stocks.

Strykr Watch: Strykr Watch

Technically, the S&P 500’s key resistance was at the 7,000 mark, which it breached briefly but failed to hold. Immediate support lies around 6,950, with a more critical floor at 6,900. The 50-day moving average is near 6,850, providing a technical cushion. RSI readings on the daily chart indicate momentum is fading, hovering near neutral after being overbought last week.

Volume patterns show heavier selling on the pullback days, confirming that the rally’s exhaustion is real. On the 4-hour chart, a potential head-and-shoulders pattern is forming, which could signal a deeper correction if the neckline at 6,900 breaks decisively.

Fibonacci retracement levels from the December low to the recent high place the 38.2% retracement near 6,850, a level to watch for buyers. Weekly charts still support a bullish bias but caution is warranted given the recent volatility spike.

The biggest risk is a hawkish surprise from the Fed. If Warsh’s balancing act fails and the Fed signals a slower pace of rate cuts or signals a pause, equities could sell off sharply. A break below 6,900 on the S&P 500 would likely trigger stop-loss cascades and invite technical selling.

Another risk is that the labor market weakness intensifies, leading to downward revisions in earnings estimates. This could deflate investor enthusiasm quickly.

Algo-driven liquidations remain a wildcard. The silver AGQ ETF’s 65% plunge shows how quickly liquidity can evaporate in certain segments, potentially spilling over into broader markets if volatility spikes again.

Geopolitical tensions or unexpected macro shocks could also derail the fragile rally. Traders should be mindful of correlation risks; a selloff in bonds or a spike in the VIX could exacerbate equity declines.

Traders looking to play the current environment should consider a cautious approach. Long entries near 6,850-6,900 with stops below 6,800 offer a reasonable risk/reward for swing trades targeting a retest of 7,000 or higher.

Short-term traders can watch for a confirmed break below 6,900 to initiate short positions targeting 6,750, with stops above 6,950 to limit risk.

Options traders might consider buying puts to hedge long exposure or selling covered calls near resistance to generate income while managing risk.

Energy sector strength suggests selective long exposure there could outperform broader indices.

Strykr Take

The S&P 500’s flirtation with 7,000 is a headline-grabber but the market’s quick retreat and underlying economic softness suggest caution. The rally is not dead but it’s gasping for air. Smart money is likely trimming risk and waiting for clearer signals from the Fed and labor market data. Watch the 6,900 support level closely this week. This is a market where patience and precision pay off.

Strykr Pulse 62/100. Momentum fading but no clear breakdown yet. Threat Level 3/5. Algo risks and Fed uncertainty loom.

• $SPY at 6,950, testing support

• Gold steady near $446 amid liquidation

• Silver AGQ ETF down 65% in flash crash

• Fed hawkish surprise could trigger selloff

• Break below 6,900 on S&P 500 triggers technical selling

• Labor market weakness undermines earnings

• Long $SPY on dip to 6,850 with stop at 6,800

• Short $SPY below 6,900 targeting 6,750

• Covered calls near 7,000 resistance