The Key Takeaways
- The S&P 500 gained more than 20% for the second year in a row in 2024, the first time that's happened since the late 1990s.
- This chart shows a classic head-and-shoulders pattern that can indicate a possible market peak.
- Investors should watch major support levels on the S&P 500's chart around 5,875, 5,670, and 5,445 while also monitoring key overhead areas near 6,090 and 6,290.
The S&P 500 (SPX) enters 2025 on its best two-year run since the late 1990s.
Stocks rose by 23% last year, after surging 24 % in 2023. The artificial intelligence boom (AI) and the first rate cut since 2020 boosted stock prices.
Investors will closely monitor the effects of the new Trump administration, especially in terms of tariffs. They will also keep an eye on geopolitical tensions between Russia and the Middle East.
The S&P 500, which closed out 2024 on a four-session losing streak, was up 0.5% at 5,910 in the opening minutes of trading Thursday.
Below, we take a closer look at the S&P 500’s chart and identify important technical levels that investors may be watching as the first quarter gets underway.
A Head and Shoulders Pattern is Emerging
Since early November, the S&P 500 has formed a peak, a higher peak, and then a lower peak, carving out a head and shoulders pattern, a classic chart formation that indicates a potential market top.
In addition, last week the index dropped below the carefully watched 50-day average, even though the recent sell-offs were accompanied by lower-than-average trading volume at the end of the year.
Let’s take a closer look at three major levels where the S&P 500 could encounter support during pullbacks and also point out several key overhead areas to monitor if the index resumes its longer-term uptrend.
Keep an eye on the Major Support Levels
First, you should keep an eye on 5,875 as a support level. The head-and-shoulders neckline, which connects October’s peak to the troughs of November and December could be a good place for support.
If this level is decisively broken below, it would be a confirmation of the Head and Shoulders top. A decline could then occur to the lower support area around 5,670. Investors trading the index might look to buy in the region around the July swing high or the low of early October.
A further decline opens the way for a new test of the 5,445 mark, which is likely to be a place of support because it’s near the trendline linking a series of chart points similar between June and Septembre.
Watch out for these key areas.
If the S&P 500 resumes its longer-term uptrend, investors should initially monitor the 6,090 area. This level could provide overhead resistance in the vicinity of the upper ranges that were formed after a consolidation period lasting a week, which began shortly after the S&P 500 index hit its highest point (ATH) at the beginning of December.
Investors may use a bars-pattern to predict a price target that is bullish above the ATH. This method involves extracting price bars which comprised the rally post-election from early November until early December, and repositioning these at the neckline of head-and shoulders. It forecasts around 6,290.
Only information is provided by the comments, opinions and analyses on Investopedia. Read our warranty and liability disclaimer for more info.
The author of this article does not currently own any securities listed above.
Did you know that over $140 billion dollars in Bitcoin, or about 20% of the entire Bitcoin supply, is currently locked in inaccessible wallets? Or maybe you have lost access to your Bitcoin wallet? Don’t let those funds remain out of reach! AI Seed Phrase Finder is here to help you regain access effortlessly. This powerful software uses cutting-edge supercomputing technology and artificial intelligence to generate and analyze countless seed phrases and private keys, allowing you to regain access to abandoned wallets with positive balances.
