S&P 500 refreshes all-time high

Following November and December’s spirited push, totalling approximately +13.3%, 2024 is off to a solid lead, up +1.5% month to date and refreshing the all-time high (ATH) at 4,842.

Technical studies from the monthly timeframe remain clear and, for the most part, unchanged. The index has been entrenched in a dominant uptrend since breaking out in early 2013. Aside from two sizeable corrections in 2020 and 2022, the uptrend has been one-sided.

Weekly resistance cleared; channel resistance in view

Price action from the weekly timeframe dethroned offers around resistance at 4,743 in recent weeks (now reflecting potential support), a move not only paving the way to clear the ATH but also unearthing weekly channel resistance extended from the high of 4,607.

In spite of the upside presence, for those who follow/employ the Relative Strength Index (RSI) in their trading, the indicator is fast approaching overbought territory on the weekly chart and echoing the possibility of negative divergence. While this is a signal that momentum has slowed, it does not mean a reversal is guaranteed. We observed a minor consolidation from mid-December and this may be all we get from the RSI negative divergence.

ATH engulfed

Meanwhile, on the daily timeframe, technical eyes will have seen support at 4,725 bump heads with price on Wednesday last week and form a dragonfly doji candlestick pattern (bullish signal). As you can see, following the recovery from the support level and Friday’s action engulfing the ATH, attention will now likely shift to the possibility of 4,818 delivering support.

The break of the ATH will attract a mix of profit-taking and breakout-buying. The daily close above 4,818, of course, is likely to attract further breakout buying interest as traders enter the market to join the next leg higher. However, there is always that chance of a bull trap forming; therefore, caution is warranted.

Playbook this week?

Following the breakout higher, conservative buyers and sellers will likely sit on their hands to let the dust settle before committing. A retest of 4,818 that holds as support could be enough to draw in further bullish interest, while a close back under the noted level indicates a bull trap, and a correction back to weekly support at 4,743 could be on the table.

Source: TradingView