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The S&P 500 closed at a record high on Friday after briefly breaching the 6K level for the first time as stocks recovered following the US presidential election.
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The index broke above a rising wedge pattern on above-average volume last week, paving the way for further potential gains in the week ahead.
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A measured move, which calculates the distance between the two rising wedge trendlines near their widest point and adds that amount to the initial breakout area, projects a price target for the S&P 500 of 6,500.
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Investors should pay attention to key support levels on the index chart around 5,900 and 5,670.
The S&P500 (SPX) closed at a record high on Friday after briefly breaching the 6K level for the first time as stocks recovered following the US presidential election.
Investors have been lifting stocks on expectations for an increasingly business-friendly White House and Congress following Donald Trump’s decisive victory in last week’s election.
Sentiment also got a boost after the Federal Reserve on Thursday cut its key lending rate by a quarter of a percentage point to a range of 4.5% to 4.75%, the lowest level since February 2023. Friday’s close S&P 500 up about 25% this year. year.
Below we provide an overview of the technical features of the index chart and highlight the price levels that investors may be looking at.
Since peaking in mid-July, the S&P 500 has traded within a rising wedge before breaking above the pattern on Wednesday following the presidential election outcome, paving the way for further potential gains in the week ahead.
Importantly, above-average volumes have supported the increase, indicating buying convictions from larger market participants such as institutional investors and asset managers.
Moreover, the relative strength index (RSI) confirms the bullish price momentum with a reading near 70, but also warns about the potential for short-term profit taking as the indicator approaches the overbought level.
Now that the index has entered price discovery mode, we can look at a chart-based upside price target and also point out the key support levels to keep an eye on during a pullback.
Investors can predict a price target using the measured movement technique, also called the measurement principle. This involves calculating the distance between the two trendlines of the rising wedge pattern near their widest point and adding that amount to the original breakout area. For example, we add 600 to 5,900, which predicts an upside target of 6,500.
Interestingly, this bullish target also roughly corresponds to a price target with a bar pattern that pulls up the S&P 500’s April through July trend move and repositions it from this month’s low near the lower trend line and the 50-day moving average of the S&P 500. rising wedge pattern.
On an initial retracement, investors should watch how the index reacts at the 5,900 level, a location on the chart that could attract support near the upper trendline and the breakout point of the rising wedge.
A breakdown below this level could cause the S&P 500 to revisit lower support around 5,670, where a trendline is near several peaks and valleys within the rising wedge pattern between July and October.
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As of the date this article was written, the author does not own any of the above securities.
