The S&P 500 index has shown clear bullish technical signals, reaching new all-time highs last week, despite underlying geopolitical tensions. This upward trend, which has persisted through October, presents an unusual pattern compared to historical market behavior. Investors are now closely watching for shifts in these signals and upcoming global events that could impact market stability.
Key Takeaways
- The S&P 500 recently achieved new all-time highs, signaling a bullish market.
- October's sustained rally is unusual, marking the sixth consecutive month of gains if it closes higher.
- The market has seen a notable absence of 4-5% corrections since April, indicating strong underlying momentum.
- Key support levels are identified at 6508 and 6360, with 6147 being crucial for the broader bull market.
- Upcoming events, including a potential US-China trade deal and Fed rate cuts, are significant market drivers.
S&P 500 Monthly Performance and Unusual Trends
October's performance for the S&P 500 is shaping up to continue a strong upward trajectory. With one full week remaining, prices are near all-time highs. This suggests a bullish pattern is likely to conclude the month, potentially extending into November.
This sustained rally is noteworthy because it defies typical seasonality. Historically, when the S&P 500 has closed higher for five consecutive months from May to September, October has often seen a decline. Data shows October closed lower in three of the last three such occurrences and four out of the last five.
Market Fact
If October closes higher, it would mark the sixth consecutive month of gains for the S&P 500. This is a rare occurrence, especially given historical patterns for the month.
Another unusual aspect of this rally is the lack of significant pullbacks. The market has not experienced a 4-5% correction since April. Even robust rallies in the past, such as those in the late 1990s and 2020-2021, included more frequent and deeper corrections. The last two corrections lasted only two days each, highlighting the market's strong buying interest.
Technical Signals and Future Targets
Technical analysis provides a roadmap for potential market movements. The monthly channel high presented a temporary reaction, but it is not considered strong resistance. Market observers would not be surprised if this level is broken, leading to further upside.
Further upside targets are projected using Fibonacci extensions and measured moves. The next major area for the S&P 500 is the 161% Fibonacci extension of the H1 drop, estimated at 6958. Following this, a measured move comparable to the 2020-2022 and 2022-2025 rallies points towards 7490.
Key Support Levels
- Initial support: 6508 (August high)
- Secondary support: 6360 (September low)
- Critical bull market level: 6147 (previous top)
A DeMARK exhaustion count for October is currently on bar 5 of 9, meaning a monthly exhaustion signal is unlikely in 2025. This suggests continued strength for the remainder of the year.
Weekly and Daily Chart Insights
The weekly chart for the S&P 500 recently formed an "inside and up" pattern, which is a bullish indicator. While previous similar patterns showed brief stalls after breaking the range, they typically continued higher. The weekly chart closed at its highs and at new all-time highs, reinforcing the bullish sentiment.
On the daily chart, a significant gap up last Monday opened directly on a trendline drawn through recent highs. The market then moved strongly away from this line, holding the gap into the close. This marked a key shift in character from the previous week's trading.
"Friday's session closed back in the long-standing green channel, but a new channel has formed with perfect time/price symmetry," according to market analysts.
This new channel shows room for the S&P 500 to rise towards 6850 next week. Support levels for daily trading are between 6750-64. A daily close below this range would weaken the bullish outlook, potentially leading to increased market choppiness within the previous range. A more significant bearish signal would be a break below the new channel low and the 50-day simple moving average in the 6600-6650 area.
Understanding DeMARK Exhaustion Signals
DeMARK exhaustion signals are technical indicators designed to identify potential trend reversals. A count reaching bar 8 or 9 often suggests a pause or dip could evolve, signaling that the current trend may be nearing its end or due for a correction.
Economic Drivers and Geopolitical Factors
Recent economic data shows the Consumer Price Index (CPI) came in softer than expected at 0.3%, bringing the year-over-year reading to 3.0%. This development removes a potential obstacle for the Federal Reserve to consider interest rate cuts. The odds of a Fed rate cut next Wednesday are almost certain, with a 91.1% probability of a December cut.
Geopolitical events continue to pose significant market risks, even if their immediate effects are short-lived. A key event is the additional 100% tariff on Chinese exports, scheduled for implementation on Saturday, November 1st. Furthermore, the existing trade deal from earlier this year is set to expire on November 10th.
President Trump is scheduled to meet with President Xi on Thursday, October 30th. The stakes for this meeting are high, as both sides aim to prevent further escalation of trade tensions. A successful deal would likely provide another boost to stock markets. Conversely, a no-deal outcome could lead to a sharp market drop, which some analysts might view as a buying opportunity.
Probable Market Moves in the Near Term
The current market charts clearly indicate a bullish bias. The long-term uptrend is considered healthy, with expectations of reaching 7000 by early next year. The near-term outlook also remains positive following last week's market action.
A significant shift in the broader market picture would require several months of sustained downward pressure, including a close below the critical 6147 level. However, the shorter-term bias could change rapidly. For example, a single social media post from a major political figure could trigger a substantial market dip, as seen previously.
The 6750-64 range represents an inflection point for the ultra-bullish view. This level is vulnerable due to an upcoming DeMARK exhaustion signal expected on Monday or Tuesday, combined with the Trump-Xi meeting on Thursday. A minor dip could easily break this level, but it may not be a reliable signal to turn bearish. Many analysts plan to buy against the 6650-6700 range.
A break and close below the new channel (rising to approximately 6650) and the 50-day simple moving average would suggest a longer corrective period might unfold. While this would necessitate a reassessment of recent positions, it is not cause for panic. A healthy 4-5% correction, which has been absent for months, could present a strong buying opportunity to join the established longer-term uptrend.
