Whether stocks can actually reach new highs is starting to look questionable, according to some chart analysts. The S & P 500 has been on the cusp of an all-time high throughout June — more than 2% off its February peak, which the broader index could have closed in one sizable rally . Instead, the S & P 500 has been treading water over the past few weeks, troubling technicians who worry the momentum that lifted the index off its April lows is starting to falter. “We now head into quarter-end with subtle breadth deterioration, loss of momentum, and some exposure measures at the highest levels of the year,” Jonathan Krinsky, chief market technician at BTIG, wrote Sunday. “Bulls continue to hold the upper hand medium-term above 5800, but we are sensing an increasing risk that this level gets tested sooner rather than later.” The technician worries the S & P 500 is in for a “choppy summer.” He said the broader index is “stuck under resistance” in the 6,050 to 6,150 range, with support at about 5,970, and then at 5,800. The S & P 500 was last hovering near 6,000. .SPX 3M mountain S & P 500, over three months Krinsky is not the only chart analyst who is concerned. Other technicians noted cautionary signals in technical indicators that measure momentum and breadth — such as the Moving Average Convergence Divergence (MACD) and the Relative Strength Index (RSI) — are starting to suggest the rally is flagging. “The growing question in our work is whether the U.S. equity markets have enough muscle to power above the February highs or be rejected by the overhead resistance,” JC O’Hara, chief market technician at Roth, wrote Sunday. “Technical indicators such as MACD and RSI were overbought and now have started to roll over, a sign of weakening internals.” O’Hara said he will keep a careful watch on technology stocks that have led the recent rally. If the sector is able to record highs, that would be a bullish signal. If it fails to do so, the sector could be due for a correction similar to July 2023 when it dropped 13%, he said. Market breadth will also have to improve. Currently, 44% of the stocks in the New York Stock Exchange are trading above their 200-day moving average, O’Hara noted. The technician said that level would need to get above 50% for a healthy market. “We respect the ferocious rally off the April lows and know well that forward returns from this sort of rate of change are bullish,” O’Hara wrote. He then added: “Hard to have a convincing bull market when over half of the stocks are below trend.”
