The S&P 500 Index’s best week in a year has brought the broad equities benchmark to a decisive point where stocks can make a significant break higher or find their gains capped.
On Friday, the S&P 500 reversed a downtrend from its September highs, hitting 4,350 on Friday after soaring nearly 6% over the previous five sessions. It also recaptured its 50-day moving average, after crossing its 200-DMA. Crossing a moving average is key because it can signal a shift in sentiment. Stocks held onto those gains Monday.
Investors often lean on technical indicators when they’re feeling cautious and want to know if price trends are being sustained. The S&P 500 has clawed back about half of last month’s 10% decline from its July high, but investors still face geopolitical risks, rising volatility and elevated inflation, underscoring expectations that the Federal Reserve is poised to keep interest rates high.
The S&P 500 currently sits at around 4,365, and chartists are monitoring the 4,355 level, which marks a 50% retracement from the peak-to-trough decline from its July highs to October lows. If it holds above that, the 4,400 level, where the index hovered during its mid-October highs, is the next number to watch, according to Keith Lerner, co-chief investment officer at Truist Advisory Services.
“To reverse this downtrend, the S&P 500 still needs to break above 4,400,” said Lerner, whose firm is overweight US stocks.