Yahoo Finance

Key Takeaways

• The S&P 500 posted a record closing high on Friday to cap off its best month of the year, as the U.S. stock market extended a post-election rally.

• As the index set a new all-time high on Friday, the relative strength index recorded a comparatively lower higher to create a bearish divergence, a chart signal indicating slowing buying momentum.

• During pullbacks, investors should watch key support levels on the S&P 500's chart around 5,870 and 5,670.

• A measured move, which calculates the depth of a rising wedge near its widest point and adds that amount to the pattern’s upper trendline, forecasts a bullish price target in the index of 6,675.

The S&P 500 (SPX) posted a record closing high on Friday to cap off its best month of the year, as the U.S. stock market extended a post-election rally.

The index gained 5.73% in November, finishing the month at 6,032, boosted by optimism that President-elect Donald Trump’s pro-business policies and the GOP’s majority in Congress would bolster economic growth and drive corporate profits.

However, investors also remain cautious about tariffs that could be imposed by the incoming Trump administration, which economists say could rekindle inflation and slow the Federal Reserve’s interest rate cuts.

Below, we break down the technicals on the S&P 500’s chart and identify important levels that investors may be watching out for.

Slowing Buying Momentum

Since mid-July, the S&P 500 has trended higher within a rising wedge, a chart pattern that appears as an upward-sloping price channel featuring two converging trend lines.

More recently, the index tracked towards the pattern’s upper trendline, though it’s worth pointing out that recent strength has occurred on declining volumes leading into the shortened Thanksgiving holiday trading week.

Moreover, as the index set a record high on Friday, the relative strength index (RSI) made a comparatively lower high to create a bearish divergence, a chart signal indicating slowing buying momentum.

Let’s identify key support levels on the S&P 500's chart to watch during pullbacks and also use technical analysis to forecast a measured move bullish target to monitor if the index continues trending higher.

Key Support Levels to Watch

Upon an initial retracement, investors should keep a close eye on the 5,870 level, currently just above the rising 50-day moving average. This area on the chart finds a confluence of support from the October peak, the mid November trough and the rising wedge pattern’s lower trendline.

A close below this important technical level could see the index decline to around 5,670, a region where the S&P 500 may encounter support near a multi-month trendline that connects a range similar levels on the chart between July and October.