The Charts Suggest Stocks Are in Trouble as a New Trading Month Begins, Says Carter Worth

The stock market’s strong performance in May might be on shaky ground as investors prepare for a new month of trading. Analysts are warning that unresolved technical patterns in the charts could weigh on the S&P 500 in the weeks ahead.

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Specifically, two unfilled gaps in the S&P 500 SPDR ETF (SPY) that appeared earlier this spring are raising concerns among market technicians. These gaps, which refer to areas on a stock chart where prices moved sharply higher without any trading in between, are often revisited by the market. When these gaps remain unfilled, they can act like magnets, drawing prices back down toward those levels.

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According to technical analysis, these gaps may need to be “answered,” meaning the market could be forced to retest and potentially fill them. Such a development would likely trigger a pullback in the broader market. Analysts describe these open gaps as “an issue” for the current bullish momentum, indicating that they remain a source of vulnerability despite the recent rally.

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The first of the two gaps appeared on May 9, when the SPDR S&P 500 ETF Trust surged higher, leaving a gap in the chart around the 567.50 level. If the market retraces to this point and fills that gap, it would reflect a 3.05% decline from current levels. While not a catastrophic move, it would still represent a notable reversal of the recent upward trend and could shake investor confidence.

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The second and more significant gap dates back to April 23, when another sharp move higher left a gap around the 529.30 level. If the market were to fall to this earlier gap and fill it, it would amount to a more substantial 9.56% drop from where the market currently stands. Such a move would erase much of the progress made in the recent rally and potentially signal a deeper correction is underway.

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Market technicians emphasize that both of these gaps are “in play” heading into the summer months, meaning they believe the odds of the market revisiting these price levels are fairly high. The possibility of such declines may weigh on investor sentiment and limit the market’s ability to continue its upward climb in the short term.

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Gaps are a common focus for technical analysts because they often indicate areas where investor emotion—whether panic or euphoria—overpowered rational trading. When a market jumps or drops abruptly, skipping over a price range, it leaves behind an imbalance that can later attract attention. In the case of the SPY ETF, the spring rally produced two significant gaps that remain unresolved, and many traders are watching closely to see whether the market circles back to fill them.

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While the May rally brought solid gains, with the S&P 500 rising more than 6% for the month, technical headwinds like these gaps could prevent the market from continuing higher without first pulling back. The situation is made more complex by broader macroeconomic factors, such as interest rate expectations, inflation trends, and trade policy uncertainty—all of which can amplify market volatility.

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Should the market begin to slide in the coming weeks, technical traders will likely see a move down to 567.50 as a healthy and expected retracement. However, a drop toward 529.30 would be more alarming and could lead to heightened selling pressure, especially if accompanied by negative economic news or disappointing earnings.

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The presence of these unfilled gaps is not necessarily a prediction of doom, but it does suggest that caution may be warranted. The market has shown resilience in the face of many challenges this year, but technical patterns like these can often foreshadow short-term turbulence. Traders and investors alike will need to keep an eye on key support levels and be prepared for potential downside as the market digests recent gains.

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In summary, although May delivered a robust rally, the road ahead may be bumpy. Two unresolved price gaps in the SPY ETF could prompt a pullback, with the potential for a 3% to nearly 10% decline depending on how much of the recent gains are retraced. As summer trading picks up, these technical levels will likely play a central role in shaping market direction.

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