July 8 2024: Bank of America’s technical strategists predict a robust summer rally for US equities, with the S&P 500 (SPX) expected to climb to 6150.
Their analysis highlights the recent surge in the SPX, which has already achieved new all-time highs and is approaching the target in the 5600s, based on a 2022-2023 bullish cup and handle pattern.
However, Bank of America underscores the importance of broader market participation. While the SPX, S&P 100 (OEX), NASDAQ 100 (NDX), and NASDAQ Composite (COMP) have reached new highs, the Russell 2000 (IWM), S&P 500 equal weight (RSP), NYSE (NYA), and Dow Jones Industrial Average (INDU) have yet to follow suit.
Bank of America believes these lagging indices still hold potential for higher highs based on their “constructive absolute chart patterns,” but their confirmation is crucial for a healthy summer rally.
Encouragingly, volume indicators are presenting a bullish picture, according to the bank. Bank of America points to the “cumulative net up volume” metric, which tracks the difference between up and down volume on an index, reaching new highs alongside the SPX.
This positive trend is echoed across the OEX, NDX, NASDAQ Composite, and INDU. Additionally, the breakout in the “US top 15 most active A-D line,” a gauge of market breadth and volume for the most actively traded stocks, is seen as a strong confirmation of the rally.
While breadth indicators haven’t fully confirmed the uptrend yet, Bank of America identifies key levels on metrics like the percentage of SPX stocks above their 50-day and 200-day moving averages as potential “tipping point supports” to watch for a definitive signal from the broader market.
