Investors deliberating whether the stock rally can continue in the second half of 2024 should keep an eye on the 200-day moving average, according to Stephen Suttmeier, technical research strategist at Bank of America Securities. The indicator, which is used by chart analysts to determine long-term trends, has been positive during the first six months of the year — as the S & P 500 surged 15% to record levels. The broad market index did not have a single daily close below its 200-day moving average in the first half. Suttmeier noted that it’s the 36th time that the benchmark has accomplished this in its history going back to 1929. In the second half, investors will face several macro hurdles, including the U.S. presidential election, while awaiting clues on whether the Federal Reserve will cut interest rates. Against this backdrop, strong technicals could be key. “Staying above 200-day MA is key for SPX in 2H,” Suttmeier wrote. The technician expects the S & P 500 could rally again in the remaining six months of the year so long as that trend continues, saying 2024 could resemble other recent years in market history when stocks made sizeable gains coming off of notable lows. Stocks gained after 2020 off the immediate lows following the onset of the Covid-19 pandemic, as well as in 2016, after stocks tumbled because of Brexit and the election of Donald Trump, as well as in 2011, following the euro zone crisis. Most recently, stocks have been advancing off the lows of 2022, following the start of the Federal Reserve’s tightening campaign. “We think that 2024 could resemble 2021, 2017 and 2013, which were recent years when the SPX did not close below its 200-day MA for the entire calendar year,” Suttmeier wrote. If the comparisons hold, that means the S & P 500 could climb 12% on average, and 11.02% on a median basis, in the back of 2024, said BofA. These represent rises to 6,115 and 6,060, respectively, for the broader index. However, if the S & P 500 falls below its 200-day moving average in the second half of 2024, that will mean weaker returns, the technician said. Even so, the technician expects the broader index can still end the year higher. “[This] scenario shows average and median returns of 0.60% (SPX 5490) and 2.43% (SPX 5590), respectively,” the technician said. “This is lackluster for 2H but should not derail a solid 2024.”
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