Key Takeaways
The S&P 500 ( SPX ) posted a record closing high on Friday to cap off its best month of the year, as the U.S. stock market extended a post-election rally.
The index gained 5.73% in November, finishing the month at 6,032, boosted by optimism that President-elect Donald Trump’s pro-business policies and the GOP’s majority in Congress would bolster economic growth and drive corporate profits.
However, investors also remain cautious about tariffs that could be imposed by the incoming Trump administration, which economists say could rekindle inflation and slow the Federal Reserve’s interest rate cuts .
Below, we break down the technicals on the S&P 500’s chart and identify important levels that investors may be watching out for.
Slowing Buying Momentum
Since mid-July, the S&P 500 has trended higher within a rising wedge , a chart pattern that appears as an upward-sloping price channel featuring two converging trend lines.
More recently, the index tracked towards the pattern’s upper trendline, though it’s worth pointing out that recent strength has occurred on declining volumes leading into the shortened Thanksgiving holiday trading week.
Moreover, as the index set a record high on Friday, the relative strength index (RSI) made a comparatively lower high to create a bearish divergence , a chart signal indicating slowing buying momentum.
Let’s identify key support levels on the S&P 500's chart to watch during pullbacks and also use technical analysis to forecast a measured move bullish target to monitor if the index continues trending higher.
Key Support Levels to Watch
Upon an initial retracement, investors should keep a close eye on the 5,870 level, currently just above the rising 50-day moving average . This area on the chart finds a confluence of support from the October peak , the mid November trough and the rising wedge pattern’s lower trendline.
A close below this important technical level could see the index decline to around 5,670, a region where the S&P 500 may encounter support near a multi-month trendline that connects a range similar levels on the chart between July and October.
Measured Move Bullish Target
To forecast a chart-based bullish target, investors can use a measured moved, also known as the measuring principle .
This technique works by calculating the depth of the rising wedge near its widest point and adding that amount to the pattern’s upper trendline. For instance, we add 600 to 6,075, which projects a target of 6,675, a region that's about 11% above Friday’s close where the index may run into overhead resistance , especially if other indicators flash overbought conditions at the same time.
The comments, opinions, and analyses expressed on Investopedia are for informational purposes only. Read our warranty and liability disclaimer for more info.
As of the date this article was written, the author does not own any of the above securities.
