The S&P 500 Index ($SPX) is near its all-time highs, but that doesn’t mean traders should be blindly buying at these levels. Instead, John Rowland, CMT, suggests keeping an eye out for a potential pullback to support — and in last Friday’s Market on Close livestream, he explained why a recent S&P gap zone is the area he’s watching for a short-term correction.
Why Gaps Matter
Gaps form when an index or stock “jumps” from one price level to another at the opening bell, leaving a blank space on the chart in between the prior day’s close. These blank spots often act as magnets for price action, with markets returning to “fill the gap” before resuming a trend. For traders, gaps represent both risk and opportunity.
In the current setup, the S&P 500 is still trading within its upward channel, but John points out that if the index breaks the channel and slips below 6,200 — a key psychological and technical level — traders should be prepared for a deeper correction.
The Gap That Started the Rally
John highlights one gap in particular that the S&P could be looking to fill, and it’s the same gap that kicked off this most recent rally. That zone sits between 6,028 and 6,059 on the S&P 500.
If the S&P 500 revisits that level, it would represent about an 8–8.5% pullback from current prices.
This would classify as a relatively minor correction, but it’s still the kind of dip that could offer investors a much better entry point than chasing all-time highs.
Top Takeaways for Traders
- Don’t chase all-time highs: If you’ve built positions earlier, this is a time to ride the trend, not add exposure.
- Watch 6,200: A break below here suggests a deeper move down toward the gap zone is possible.
- Key demand zone: Between 6,028–6,059, where gap support aligns with previous all-time highs.
- Correction potential: Roughly 8–8.5%, which is healthy in the context of the broader uptrend.
Ultimately, John Rowland concludes: “I love gaps, and I wouldn’t be surprised if this market pulls back into that zone. That’s where I’d want to be a buyer.”
For traders looking to refine their strategy, trading gaps can be an essential skill. And Barchart’s screeners for pre-market and post-market gappers make it easy to spot and track these setups daily.
Get the quick breakdown from John in this clip, and follow along with Market on Close each Friday for more.
