S&P 500 May Soar Above 6,100 Following Pattern Breakout, According to BofA

Investing.com — The S&P 500 recently broke out from its cup and handle pattern formed between July and September, setting a positive stage for the key equity index.

Despite the often unpredictable nature of late September, strategists from Bank of America believe that maintaining the range of 5670-5650 to 5615 will “keep this breakout firmly in place with upside potential to 5930 and 6180.”

This optimistic outlook is bolstered by rising 50-day and 100-day moving averages, currently near 5520 and 5441, respectively, along with additional chart support around the 5400-5390 range.

BofA also noted significant strength in market breadth last week, as new highs in advance-decline lines serve as a bullish signal for major U.S. equity indices.

This week, strategists identified similarly positive patterns in cumulative net up volume, highlighting that this volume “breadth” remains favorable for the S&P 500, NYSE Composite, and NASDAQ Composite.

U.S. equities finished last week on a high note, fueled by the Federal Reserve’s first interest rate cut in years, which sparked increased investor interest in risk assets.

All three major indices closed positively. The S&P 500 rose by 1.36%, marking its fifth weekly gain in the last six and pushing its increase for 2024 to nearly 20%. The Dow Jones Industrial Average climbed 1.62%, while the Nasdaq gained 1.49%.

These gains followed a larger-than-expected 50 basis point rate cut from the Federal Open Market Committee (FOMC), marking the first reduction since 2020.

During the press conference, Fed Chair Jerome Powell emphasized that the rate cut does not indicate significant economic issues and expressed a positive outlook.

The Fed’s “dot plot” suggests an additional 50 basis points of cuts by the end of the year, with another 100 basis points anticipated in 2025, consistent with forecasts.

Powell also reiterated that future policy decisions will depend on data and will be made on a meeting-by-meeting basis.