For months now, investors have been speculating on whether the S&P 500 can reach a record level of 8,000 by the end of the year. This achievement, though purely arbitrary, would require the index to grow by an additional 3.9% which is not unthinkable given that the S&P 500 has already grown by 4.1% thus far in August. If the market can maintain that growth, it is likely that it may reach its goal by November, but plenty of setbacks could occur before then. The market faces potential volatility as current momentum shifts, requiring a closer look at technical indicators and broader sector rotations to determine if this rally can truly be sustained.
Starting in August, the S&P 500 jumped nearly 4% after seeing barely any growth through June and July. Since then, bullish momentum has been slowing as indicated by the MACD, which continues to slip downward. While this could signal several more months of slow growth, taking out the daily noise and looking at the data on a weekly basis, the MACD creates a pattern equalizing momentum that helps identify where we are in the market cycle.
While the momentum seems to be slowing down, this is not unusual for a stabilizing bull market and is comparable to the market of mid-to-late 2024. In that time, despite trading down for several weeks, the S&P 500 ended the year up 23% from the start. Additionally, momentum hovered around zero as opposing forces balanced each other out. This serves as a reminder that bear markets are defined by large downward momentum which we do not see forming today.
This summer has been defined by a turbulent earnings season for semiconductors and technology stocks with many investors choosing to rotate into more stable industries like utilities and healthcare. That may have an effect on day-to-day volatility, but we still believe that the S&P 500 still has room to grow before hitting its upper level of resistance.
This material is for informational purposes only and is not intended as investment, tax, or legal advice. Past performance is not indicative of future results.
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