'Bears Are Winning The Race' As S&P 500 Falls Below 6,500: Here's What Could Come Next

Last week ended with the S&P 500, tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY), falling below key levels as investors digested the ongoing attack on Iran, rising oil prices and the potential for boots on the ground in the Middle East. Market Expert Jay Woods shared what the S&P 500 falling below its 200-day moving average and a bull-run breaking could mean for investors and why a 10-day clock could be the key metric to watch this week. • State Street SPDR S&P 500 ETF Trust stock is moving in positive territory. Why are SPY shares climbing? S&P 500 Breaks Support The S&P 500 fell below the 6,500 level on Friday for the first time since Sept. 8, 2025, with the market index down more than 5% from its peak. "The pullback has been rather methodical as the index has dropped lower from one support level to the next," Freedom Capital Markets Chief Market Strategist Woods said in a Sunday newsletter. "The way we ended last week has traders concerned that cracks in the market foundation may lead to an even bigger drawdown." Woods said the sell-off comes with the Iran War entering a fourth week and the stock market that was "bending not breaking" too far as key support levels were breached. The 200-day moving average and lows from October and November were broken by the S&P 500 on Friday. "We've broken down," Woods said during an interview with CNBC on Friday. "The bears are winning the race." The market expert said this could be a "really passionate" sell-off or it could see a quick rebound. What Happens Next? Woods said Friday's sell-off and break below the 200-day moving average for the S&P 500 came with Middle East headline concerns, but also on a day of options expiration and index fund rebalancing. "We will find out that significance over the coming days as this crack could lead to a deeper and faster correction," Woods said. "We have seen this movie before, but each time the market cracks, it is under a very different headline." The market expert highlighted that the S&P 500 falling below the 200-day moving average snapped a 214-day streak above the key trading metric. Woods started a 10-day clock on the S&P 500 to return above its 200-day moving average. "Statistics show that 71% of the time when the market has broken below the 200-day moving average after 200+ days above it, it recaptures the average within 10 days." Woods said this is a based on a sample size of 28 times this has happened and the largest drawdown was around 3% during those prior occasions. The market expert also added that the market pattern of the current drawdown resembles last year's "Liberation Day" sell-off, which saw the market sell-off based on headline tariff news. The S&P 500 fell below the 200-day moving average and took 10 days before it traded above the mark. Woods said a rally is likely in the short term and added that this could be a time to put money to work in the stock market, despite the headline risks. Photo: Shutterstock