S&P 500 Index: A lot of technicians are pointing to further upside – Merrill

S&P 500 extended its year-to-date rally last week despite the fact that the index 500 fell 1% on Friday. Economists at Merrill note that a lot of technicians are pointing to further upside overall.

A lot of technicians believe that the next resistance is 4325

“The last time you had a deeply inverted yield curve this deep and stocks rallied this aggressively off their lows from the October lows of say 3490 on the S&P 500 give or take was 1979 and then between 2006 and mid-2007 when the S&P rallied 25% off its lows.”

“If you go 25% off the lows of 3490, in today’s terms that moves the index to 4350. That’s not the target. These are just technical structural factors that if similar patterns hold as the last time we had a deeply inverted curve and stocks rallied this aggressively off their lows on average about 25%, it could take S&P 500 to 4250.” 

“Now, if you look at technical analysis, a lot of technicians believe that the next resistance is 4325. That is not our expertise here in CIO, but with the momentum taking us above 4100, a lot of technicians are pointing to further upside overall.”