A complete breakdown of the S&P 500 chart and its implications for the second half of the year | Wilnesh News
Let’s take a look at the first half of the year for the S&P 500 to tell us there are opportunities for more upside in the second half. The S&P 500 just posted its third consecutive quarter of gains and its sixth in the past seven. The last longer quarterly winning streak was a seven-game winning streak from the second quarter of 2020 to the fourth quarter of 2021. From the first quarter of 1995 to the second quarter of 1998, the S&P 500 rose for 14 consecutive quarters. This again shows that trends last longer than we think (sometimes much longer). It was a unique time, but many astute market observers believe that the current technology wave is a lot like the late 1990s. However, there is much disagreement about where we are at. Four Key Factors The key is that we can believe anything we want, but the market will tell us if we are right or wrong. We’d better pay attention to it. Fortunately for us, price action eventually turns into trends and patterns that are identifiable on the charts. This keeps us on the side of the uptrend through the first half of 2024. Here are four important factors we continue to watch closely in the second half of the year. 1. Successful Bullish Patterns We’ve heard a lot over the past few days about the S&P 500’s strong first six months of gains, but here’s the scorecard we’re most concerned about: Number of Successful Chart Patterns: Bullish: 7 Bearish: 0 This chart goes back to 11/23, however, 5 of the 7 upside targets for the S&P 500 have been achieved in 2024. The technical picture of the index won’t be any different. 2. Rotation We know that the S&P 500’s year-to-date moves are largely driven by the largest stocks, but a total of 292 stocks in the S&P 500 have gained so far this year (58% of the index). As of July 1, 2024, 116 of these indexes have gained more than the S&P 500 (+14.8%). Specifically, since the start of the second quarter, technology has been the index’s worst-performing sector 10 times; in that time, the S&P 500 has posted positive width seven times (a 70% win rate). So while we need Tech to be the leader so that the S&P 500 can continue to rise given the industry’s 32% weighting, other sectors need to continue to rise during a period when Tech lags. 3. Low Two-Way Volatility This +/-1% volatility chart says it all. In the first six months, we had 15 1% gains and only 7 1% losses. What this tells us is that volatility is very low in both directions, which is a big reason why the above bullish pattern continues to work. For some context: In the first half of 2023, the index rose 1% 26 times and fell 1% 16 times. In the first half of 2022, its stock price rose sharply by 30.1% and fell by 37.1%. Without knowing anything else, we can guess at how those years were spent. 4. Good Close As of Monday, the S&P 500 had closed 77/125 trading days above its midday point. This is a 62% winning rate. That’s not extreme, but it includes the period from March 1 to April 19, when the S&P 500 closed above the midpoint only 41% of the time. Since then, the index has closed above the midpoint again nearly 70% of the time. This short-term phenomenon is where it all started. If the largest institutions are bullish, they will continue to buy throughout the trading day even if the price moves higher. This results in a powerful shutdown. When this continues to happen, an uptrend forms. There are other factors that have helped us get to this point, but from a technical perspective these are the four most important ones. If they keep working hard, the second half could look a lot like the first. -Frank Cappelleri Founder: Disclosure: (None) All opinions expressed by CNBC Pro contributors are theirs alone and do not reflect the opinions of CNBC, NBC UNIVERSAL, its parent or affiliates, and may have been previously published by them at Broadcast on television, radio, the Internet or other media. The above is subject to our Terms and Conditions and Privacy Policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any security or other financial asset. The content is general in nature and does not reflect any individual’s unique personal circumstances. The above may not apply to your particular situation. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor. Click here to view the complete disclaimer.
