S&P 500 Faces 5500 Resistance, 4800 Support Levels

Wall Street technical analysts are closely monitoring the S&P 500 index, identifying 5500 as a critical resistance level and 4800 as a potential support level. The market's technical indicators suggest ample room for a rebound, but investors should be cautious of the risk of retesting the bottom.

Analysts are using chart analysis to determine the next move for the S&P 500 index. Daniel Kirsche, the head of technical analysis at Jefferies, noted that the index recently broke above its 21-day moving average, marking the first close above this level since the sell-off began in late March. The next target, 5500, is seen as a significant resistance level, representing a 50% retracement of the recent downtrend. If the index closes above this level, it could further pressure the bearish trend.

Kirsche emphasized that the more the market tests the resistance level, the higher the probability of a breakout. Once this level is breached, a rebound to 5800-6000 points appears feasible. For traders looking for potential downside targets, 4800 is a level to watch closely. Jason Hunter, a strategist at Morgan Stanley, believes the market could drop to this area, possibly even to 4500 points, forming a more durable bottom.

John Kolovos, the chief technical strategist at Macro Risk Advisors, suggests that 4800 could be the bottom, but given the recent downtrend, a drop to 4700, or even a deeper test to 4480 or 4300 points, is more likely. Market breadth and momentum signals are mixed, with the number of stocks participating in the rebound increasing, indicating a more reliable trend. High net leverage rates and improving technicals suggest that investors are increasingly betting on a market rebound.

The net leverage ratio, which measures the degree to which investors are bullish or bearish, is currently at a five-year low, indicating caution among investors. The percentage of S&P 500 stocks trading above their 200-day moving average has risen to 31%, up from less than 20% in early April. JC O'Hara, the chief technical strategist at Roth Capital Partners, hopes this number will approach 50%. The Relative Strength Index (RSI), another key indicator, fell below 30 in early April, signaling oversold conditions, but has not yet reached overbought levels during the subsequent rebound. This suggests that the index still has significant upside potential.