Traders work on the floor at the New York Stock Exchange.
Eduardo Munoz | Reuters
The stock market is itching to make new highs, and it may soon, as long as progress continues to appear to be made on the trade war front.
Technical market analysts, who watch stock charts, see an opportunity for stocks to break above previous highs, after the S&P 500 rose above its 50-day moving average last week and crossed above August highs, two signals of positive momentum.
For fundamental analysts, there are other positives in place for stocks, including a possible bottom in interest rates, central bank easing and a pick up in some economic data.
But the one wild card is the trade war, which appears to be making progress with talks planned for October between U.S. and Chinese officials.
The S&P 500 is about 1.8% away from its late July high of 3,027.98, and stocks have recently been driven higher by strength in technology and consumer discretionary stocks. Both sectors are within 2% of all-time highs.
“Technically, it set itself up, and now it has to keep itself there,” said Scott Redler, partner with T3Live.com. “For the camp that wants to see new all-time highs, they would like to see the S&P 500 to hold 2,940 to 2,955. The longer it holds that, the more likely it will be make 3028, the all-time high.”
September has started off on positive footing after August’s decline. Usually a weak month, the S&P 500 was up 1.7% so far for September, as of Monday morning.
Stocks started Monday higher, but were mixed to flattish in afternoon trading, as technology stocks gave up some gains. Bond yields, which have moved to worrisome low levels in August have been higher in September. The 10-year Treasury was yielding 1.61%.
“Last week’s action was meaningful from a trading basis, in that we broke above the August range, the upper end of the range being 2,940,” on the S&P 500, said Ari Wald, technical analyst at Oppenheimer. “I think the underappreciated point for us is the market is coming off cyclically oversold levels.” in the past 52 weeks, the S&P has moved higher by just 2.75%, he added.
“After such little market progress, we’re starting to see signs conditions are getting better and global equities are beginning to base in a move higher,” said Wald.
He said the market is still reacting to last year’s sell-off, and is now in a position for a move higher. “When it’s done raining, it’s still wet outside, and that’s what we had in 2019. The storm was in 2018 when we had the big downturn in December,” Wald said. “2019 has been base building… It was our case there would be a shakeout summer.”
Wald said there is also a negative attitude on the part of investors, which could act as a contrarian positive. “The way things are shaping, I think we could experience a nice run up in the equity market in the