scorecardCHART OF THE DAY: The S&P 500 is running into an obstacle that could make or break the bull rally
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CHART OF THE DAY: The S&P 500 is running into an obstacle that could make or break the bull rally

Matthew Fox   

CHART OF THE DAY: The S&P 500 is running into an obstacle that could make or break the bull rally
Stock Market2 min read
  • The S&P 500 is running into the same obstacle that stopped prior stock market rallies over the past two years.
  • The 4,600 level on the S&P 500 is a key technical ceiling that needs to be broken for the bull market to continue.
  • "The technical backdrop is encouraging for a breakout above 4,600, although it may take a few attempts based on the degree of overbought conditions," LPL Financial said.

Our Chart of the Day highlights a key obstacle in the S&P 500 that needs to be broken for the bull market in stocks to continue.

The 4,600 level on the S&P 500 has been a stubborn ceiling for the index ever since a bear market materialized in 2022. In February 2022, April 2022, and July 2023, the S&P 500 pushed up against 4,600 only for sellers to step in and send stocks lower.

The same thing happened this past week, with the S&P 500 hitting an intraday high of 4,599.39 on Friday. The index swiftly moved lower, albeit slightly, with it down about 0.60% since Friday. On Monday, the S&P 500 retreated further, slipping 0.7% to 4,562.

According to LPL Financial's chief technical strategist Adam Turnquist, there could be significant upside for stocks if the 4,600 level is taken out.

"The index closed just shy of key resistance at 4,600 — a level tracing back to the early 2022 highs and a spot where the summer rally struggled. A topside breakout would leave 4,632 and the 4,700 to 4,725 range as the next resistance hurdles to clear," he said in a note on Monday.

A jump to 4,725 represents potential upside of 3.5% from current levels and would put the S&P 500 within 2% of its record high. Turnquist said an increase in market breadth, or participation in the rally among individual stocks, is a good sign for a continued rally.

"Participation in this rally continues to build," he said, highlighting that more than two-thirds of S&P 500 stocks are trading above their 200-day moving average. "Momentum remains bullish."

Technical analyst Katie Stockton of Fairlead Strategies echoed that sentiment in a Monday note to clients.

"This is a proving ground, and it would be a natural place for some consolidation, although we have no indications of it. The rally remains supported by even the most sensitive momentum gauges," Stockton said.

Turnquist said while 4,600 could continue to act as resistance in the near-term, don't be surprised by a potential breakout.

"Overall, the technical backdrop is encouraging for a breakout above 4,600, although it may take a few attempts based on the degree of overbought conditions," he said.




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