Key Technical Levels For The S&P 500 After A Huge Quarter

The stock market has been scary territory for investors for the past six months. Concerns over the ongoing trade war with China, slowing economic growth worldwide and inverting Treasury yield curves are just a few of the headlines that sent the S&P 500 crashing below 2,350 and on the precipice of bear market territory back in December.

So far in 2019, however, the market weakness has been a distant memory. The SPDR S&P 500 ETF Trust SPY is up 15 percent year to date. But now that the dust has settled on the fourth-quarter correction and the first quarter, traders are taking a look at the S&P 500 chart to reassess the bull market outlook from a technical perspective.

Short-Term Outlook

The near-term outlook for the S&P 500 is extremely bullish. The index has consistently been making higher highs and higher lows since the December bottom and is now back within 2 percent of all-time highs set back in September of last year. A re-test of the 2,940 September high in the near-term is looking increasingly likely in the coming weeks.

In the meantime, the late March low of around 2,800 should serve as support. The 2,800 level has been a key level for both psychological and technical support and resistance dating back to June of last year. The late March high of around 2,850 could also potentially serve as near-term support in the event of a pullback.

Longer-Term Technical Picture

If the current rally stalls out before a re-test of 2,940, the S&P 500 would form a potentially bearish long-term head-and-shoulders formation.

The left shoulder would be represented by the rally to 2,870 in January 2018, the head would be the rally to 2,940 in September 2018, and the right shoulder would potentially be the current rally. If the market forms this somewhat distorted head-and-shoulder pattern, it would be an extremely bearish technical pattern given that head-and-shoulder formations are typically indicators of market tops.

If the S&P does make it above 2,940 to new highs, the 3,000 level could serve as a psychological near-term resistance level, but long-term investors should not be deterred if it takes the index a few days or weeks to break out above 3,000. In this case, look for 2,940 to be near-term support while the S&P 500 consolidates.

One bit of good news from a longer-term technical standpoint is the recent golden cross of the 50-day simple moving average above the 200-day simple moving average. The last time this technical buy signal occurred was back in early 2016. Following the previous golden cross, the S&P 500 rallied from around 2,100 to 2,872 within less than two year’s time.

Critical Levels To Watch

For now, key potential resistance levels are the index’s all-time high of 2,940 and the psychological level of 3,000. For traders worried about the longer-term fate of the bear market, the one true indicator that the bull market is alive and well would be for the S&P 500 to break above 2,940. If the market is making new all-time highs, the proof is in the pudding.

Key support levels are the late-March high of 2,850, the long-term resistance level of around 2,800 and the December low of 2,346.

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