Fairlead Strategies says S&P 500 rally could extend to 6280 in near term

Investing.com -- Fairlead Strategies said today that the S&P 500 has a bullish short-term outlook following a recent breakout from a three-week coil formation.

The technical breakout propelled the index above its final resistance level, suggesting the potential for an approximate 2.5% increase from yesterday's close to a short-term target of around 6,280.

However, Fairlead Strategies cautioned that the rally might be temporary, highlighting weak seasonal influences. The research firm identified the 50-day moving average, currently at 6,009, as the initial support level.

The bullish short-term bias was contrasted with a neutral long-term perspective. Fairlead Strategies noted that the minor breakout does not address the longer-term challenges faced by the SPX as indicated by their monthly indicators.

The analysts expect long-term momentum to potentially decline again in February, as suggested by the monthly Moving Average Convergence Divergence (MACD) histogram. Additionally, the monthly stochastics are at risk of rolling over, influenced by countertrend signals from the DeMARK Indicators.

Fairlead Strategies anticipates a choppier market environment throughout the year, which could increase the likelihood of a significant correction after the short-term advance.

If such a correction occurs, the firm's focus will shift to the secondary support level at 5,783, marking the lower boundary of the recent trading range.

This level is considered critical for determining the market's direction in the event of a downturn, the analysts concluded.