S&P 500 Nears Its Next Roadblock After the Best Week in a Year

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.

Testing Technicals

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.