Bank of America (NYSE:)’s technical strategists see a healthy summer rally for US equities on the horizon, with the (SPX) projected to reach 6150.
Their analysis highlights the recent surge in the SPX, which has already achieved new all-time highs and is approaching the projected target in the 5600s based on a 2022-2023 bullish cup and handle pattern.
However, Bank of America emphasizes the importance of broader market participation. While the SPX, S&P 100 (OEX), NASDAQ 100 (NDX), and (COMP) have reached new highs, the (IWM), S&P 500 equal weight (RSP), NYSE (NYA), and (INDU) haven’t followed suit.
Bank of America believes these laggards 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.
They explain that 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.
