Should You Bet On The S&P 500’s Bull-Run?

The S&P 500 index has experienced one of its biggest rallies since bottoming in March last year. The SPX has gained more than 80% over the last 13 months. This rally appears set to continue based on technical analysis of the trend. 

                                                                                                  Image Source: Unsplash

After pulling back slightly between August and October, the US500 index has gone on to gain nearly 28%, again re-affirming the bullish outlook of the market. 

Technical Overview

Technically, the S&P 500 index appears to be trading within an ascending channel formation in the daily chart. This indicates a significant bullish bias in the market sentiment. The trend appears to have a strong positive correlation with a Pearson’s R of about 0.966. 

This suggests that the current trend can be expected to continue for the foreseeable future with the price action primarily concentrated closer to the mean. The few occasions that the price deviates from the mean present an opportunity to buy with a target price around the mean section of the channel.

This form of trading can be very tricky at times which is why some investors opt to buy long-term. Looking at the chart, buying long-term makes a lot of sense now, but sophisticated investors can also take advantage of the short-term deviations that create opportunities. This can be done via CFD platforms like AxiTrader that allow traders to trade an asset multiple times a day without attracting high transaction fees. This full review on AxiTrader discusses this feature and more in detail. Therefore, trading the S&P 500 could be an ideal opportunity to profit in the short term while still keeping some positions long-term as the bull run continues.

Fundamentals Overview

From a fundamental perspective, the S&P 500 index along with all the leading US indices continues to carry a strong bullish outlook driven by the successful rollout of the covid vaccine.

This also comes at the back of the $1.9 trillion stimulus checks— and with a fourth stimulus package also on the way, things could get more interesting in the coming months. Therefore, while business activity may be affected by the pandemic, there is still enough money in circulation to ensure that the purchasing power of the people remains strong. This boosts activities like stock market investing, which is good for the leading US indices. 

In the latest round of US data, the Federal Reserve also chose to keep the base interest rates unchanged at 0.25%. Again, this keeps the cost of borrowing low thereby allowing financially distressed organizations to increase their lines of credit during the pandemic.

Another thing that is boosting US stock prices, and therefore the S&P 500 is the company earnings. We are now approaching the climax of the earnings season for Q1 results. The biggest technology companies continue to report relatively good results, which in turn boosts the S&P 500 index.

Conclusion

In summary, the S&P 500 index appears to be having one of its biggest rallies. There are strong fundamentals to support a continuation of this rally to the foreseeable future. Technical analysis also appears to suggest that the current movement is sustainable amid a strong Pearson’s correlation coefficient in the regression trend. This presents investing opportunities both in the short-term and for the long term.