KEY TAKEAWAYS
The $S&P 500(.SPX)$ stood on the 6,000-point mark on Monday trading, extending a rally for stocks that's been fueled by optimism about strong corporate earnings and economic data.
Investors should track key overhead areas on the $S&P 500(.SPX)$ 's chart around 6,100 and 6,575, while also watching major support levels near 5,770 and 5,650.
$S&P 500(.SPX)$ stood on the 6,000-point mark this week for the first time since February, The benchmark index has rallied sharply from its early-April low to trade just 2.3% below the record high it established in mid-February.
Last month, the $S&P 500(.SPX)$ posted its biggest monthly gain since November 2023, as concerns about the Trump administration’s "Liberation Day" tariffs have subsided.
Below, lets take a closer look at the S&P 500’s chart and apply technical analysis to identify key levels that investors will likely be watching.
Key Overhead Areas Worth Tracking
The first key overhead area to track sits around 6,100. This area may provide resistance near a trendline that connects a series on peaks that formed on the chart between December and February just below the index’s record high.
TIMOTHY SMITH at investopedia.com pointed thatInvestors can project an upside target above the record high by using the bars pattern tool. When applying the analysis to the $S&P 500(.SPX)$ ’s chart, we extract the steep move higher following the breakout from the descending broadening formation and reposition it from the pennant's breakout point. This projects a target of around 6,575, about 10% above Friday’s close.
Major Support Levels to Watch
During retracements, investors should initially watch the 5,770 level. The index could find support in this area near the low of the pennant pattern, which closely aligns with the 200-day moving average (MA)(the purple line) and a range of corresponding trading activity on the chart extending back to September last year.
Finally, a close below this level could see the $S&P 500(.SPX)$ revisit lower support around 5,650. Those who invest in the index may seek buying opportunities in this region near the upward sloping 50-day MA (the orange line) and a horizontal line that links a series of price action on the chart between July and May.
Key Data that will Influence the $S&P 500(.SPX)$
Data released last week showed signs of a cooling in the U.S. economy. The Atlanta Fed’s GDPNow tool update showed that the second-quarter U.S. GDP growth rate was revised down from 4.6% to 3.8%.
Downside risks to the labor force participation rate are increasing due to the Trump administration’s immigration policies. The non-farm payrolls report showed a weak labor market, but it did not collapse. The number of new non-farm jobs in May was better than expected, which eased some concerns about the economy.
U.S. inflation data, the Consumer Price Index (CPI), will also be released on Wednesday.
Any sign of faster price increases in the United States will be seen as a sign that tariffs are having an impact on the U.S. economy. But the market has recently “ignored” these data due to the suspension of tariffs.
Fed: The Fed’s internal attitude remains cautious about policy easing (rate cuts)
Professional Managers' Views
Nicholas Colas, co-founder of DataTrek Research, reported in an email on Monday that institutional investors' confidence in U.S. stocks is rapidly increasing.
Binky Chadha, head of U.S. equities and global strategy at Deutsche Bank, raised the year-end target for the $S&P 500(.SPX)$ from 6,150 to 6,550. However, Deutsche Bank warned that future gains may be unstable, such as trade tensions escalating again, and it is not ruled out that it will trigger a sharp correction in U.S. stocks.
Lance Roberts, Chief Strategist http://RIAAdvisors.com, With the number of $S&P 500(.SPX)$ and $Invesco QQQ(QQQ)$ stocks trading above their 200-DMAs remaining muted, there is still likely a good bit of upside pain in the market.
Source: Zenolytics. T11 Capital.
Overall,
the $S&P 500(.SPX)$ broke through 6,000 points, and with the change in the mentality of institutional investors from cautious to bullish, it injected new vitality into the US stock market. The S&P 500 index currently has a price-to-earnings ratio of 23 times. But the price-to-earnings ratio is not static. If earnings improve, the rating will be more reasonable. The economy falling into a period of weak growth may have a great negative impact on the stock market, but the current data does not fully support the bearish view.
Whether the market can continue to rise in the coming months may depend on the dynamic balance of economic fundamentals, policy environment and investor sentiment.
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