The stock market is currently experiencing a bullish technical breakout, indicating potential upside for equity prices as we approach the end of the year. This breakout comes as stocks surged on Tuesday following the release of the October Consumer Price Index (CPI) report, which showed a cooling down of inflation. The decline in interest rates that accompanied this report led to a 2% surge in both the Nasdaq 100 and the S&P 500.
According to technical analyst Katie Stockton of Fairlead Strategies, the recent strong gains of the S&P 500 suggest that the index will continue to rise in the coming weeks. Stockton believes that the index will likely test important resistance levels near 4,600 by the end of the year, which would represent a nearly 3% increase from current levels and put the index just 5% below its record highs from January 2022.
Bank of America technical analyst Stephen Suttmeier also supports the bullish outlook for the S&P 500, stating that the index will need to hold support around 4,343 to maintain its upward momentum. Suttmeier also highlights the potential for further upside in the tech-heavy Nasdaq 100, as it has broken above its downtrend line from late July. He believes that the index could rally back to its 2021 peak and even reach the late-2021 peaks.
Suttmeier finds confidence in his bullish outlook from the 25-day put-to-call ratio, which has generated a contrarian bullish signal after a spike in October. This ratio measures the number of bearish put options relative to bullish call options, and a persistently bearish stance can indicate a market bottom with potential for upside.
In addition, Suttmeier is monitoring market breadth, particularly the share of S&P 500 stocks above their 50-day moving average. As long as this percentage remains within certain levels, he believes that the bullish breakout will continue with room for further gains.
Overall, the stock market is currently showing positive signs for equity prices, with technical indicators pointing towards potential upside in the coming weeks. However, it is important to monitor key support levels and market breadth to gauge the sustainability of this bullish trend.