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Technical analysts say more bullish signs for stocks are showing up in the charts.
The S&P 500, for one, closed above a key technical level Tuesday, when it finished above its 200-day moving average for the first time since Dec. 3. The S&P rose 1.3 percent Tuesday to 2,744, one point above the 200-day, a momentum indicator based on the average price move over a 200-day period.
“It should open the door to 2,800 now…It does feel like the advance/decline line is really strong. The broad-based rally is strong. We have two days of overseas markets rallying. It doesn’t seem as if it’s a fake out for now…The active bulls keep stepping up where they have to,” said Scott Redler, partner with T3Live.com who follows the market’s short-term technicals. Advancers led declining issues by three-to-one on the New York Stock Exchange Tuesday.
“It was another obstacle that this wall of worry got above,” said Redler. He said traders became more confident when the S&P 500 regained the psychologically important 2,700 level on Friday, and now that the S&P has regained the 200-day, it is signaling more gains ahead.
Stocks were higher Tuesday amid optimism for the China trade talks and a tentative deal to avoid a government shutdown.
Fundstrat technical analyst Todd Sohn said the more time that passes, the less likely it is the S&P 500 will retest the December lows. “You could get a pull back to 2,550 to 2,600, and that may be all you need,” he said.
“I do like what I’m seeing. It’s important to remember the S&P is up 17 percent over 32 trading days. It’s a really good run, and I don’t want to stand in front of it but at some point, it’s going to need to pause for more than two or three days,” said Sohn.