Is a 3% to 5% pullback the next S&P 500 signal?

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Breadth is fading even as the S&P 500 (^GSPC) grinds higher. On Trader Talk, Fundstrat market technician Mark Newton tells Kenny Polcari why breadth divergence and warming sentiment point to a choppy mid-October to mid-November—and a likely 3% to 5% pullback window in November. He breaks down the telltale signs he’s watching (stocks above 20-day averages and whether megacap tech finally rolls over) before the next leg higher.

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This post was written by Langston Sessoms.

Video Transcript

00:00 Speaker A

Let's talk about what you think the next big signal's going to be from a technical kind of perspective, right? What what are you looking for? What are the signs of, you know, another look, I was going to say a potential breakout, but we've clearly broken out.

00:10 Speaker B

I think you have to differentiate between short-term and and and intermediate term. I think short-term, we want to see evidence when you start to see real breath divergence. and we've seen breath, you know, it's the percentage of stocks above their 20 day moving average is down about almost half of where it was about three months ago.

00:24 Speaker A

Okay,

00:24 Speaker B

That's interesting. It's not a we're going to sell everything. It just means that tech is working, the rest of the market really hasn't. Now that's starting to slowly change. If we don't see the rest of the market go up materially in October to join tech, that would be a little bit of a concern if and when we see sentiment start to get more optimistic. My own cycle say mid October to mid November is going to be a choppy period. If we're going to get a correction and I do think we're going to get some sort of a back and fill. I think that's going to be our window is likely November. So short-term, that's what I'm looking at.

00:54 Speaker A

All right, so when you say, when you say a slight correction, 5 to 8%, 3 to 5%?

01:00 Speaker B

I probably three to five, very, very difficult to know. All I know is if tech is still working really, really well, uh very difficult to expect too much.

01:07 Speaker A

Right, too much.

01:08 Speaker B

and and and I want to see tech really start to roll over. That meaning the leaders, the Nvidias of the world. And I mean I don't mean I want to see it because I'm bearish. I mean, if you want to be bearish on the stock market, you need to see evidence of these main leadership stocks within the S&P starting to roll over. We don't see that yet.

01:21 Speaker A

Starting to fill.

01:23 Speaker B

Right. For the intermediate term, it's more of a longer-term, you know, where where nothing is really working and and uh nine out of 10 markets will peak because breadth really starts to roll over. How many stocks are within 20% of all-time highs? When that starts to shift, the stock market doesn't peak at all-time highs, but many many stocks peak and start to fall off beforehand. So when you start to watch other indicators like that, it will give you a clear warning signal that something is amiss and I really want to pay attention.

01:52 Speaker B

The cycles that I look at have been bullish since 2022. They show a little bit of a choppy phase coming in in 2026. That doesn't mean a bear market. It does mean that after two years of 20% and then potentially this year being up 20%, 20 20 20

02:07 Speaker A

Right.

02:07 Speaker B

Midterm election years typically are a year when when you you have to consolidate. So, uh, I'm I'm watching but I'm not really taking much action right now to try to prepare for it.

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