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The S&P 500 is rallying after a massive rally in A.I. starts to generate optimism in the broader stock markets and even more so since the Nasdaq100 has posted huge price gains.
It could well be time for the S&P500 to play catch with the massive gains in the Nasdaq100 as the S&P500 has lagged our indices and could well be a good value proposition at current levels.
Additionally, large bearish bets against the S&P500 have been at record levels over recent weeks according to speculative data. This is normally a contrarian indicator for the index.
Typically, when we see hedge funds making large one-way bets, we need to pay close attention as the opposite can happen. Hedge funds were also very bearish towards the Nasdaq100 before it started to rally.
With this in mind, I think we are now going to see an attack upon the 4500-resistance level making it extremely likely a test is going to take place above this key psychological level.
Something else to consider is market sentiment. The ActivTrader sentiment platform shows that only 31 percent of traders are bullish towards this market. I believe this is a positive sign because positive sentiment is not high as you would expect.
Usually, we should look to fade sentiment extremes, although this is not currently present. We probably need to see bullish sentiment to take hold before looking to sell the S&P 500 in order for the next major correction to happen.
S&P 500 Short-Term Technical Analysis
The four-hour time frame shows that the S&P500 has broken higher, although an inverted head and shoulders is present, it is also the case that the Ichimoku indicator is issuing a strong buy signal.
Upside risks are deceased if we see a drop towards the 4,200 level. According to the Ichimoku indicator we should not see much of a drop below the 4,250 level in the coming days.
S&P 500 Medium-Term Technical Analysis
Looking at the daily time chart, the central focus remains a strong buy signal from the Lagging Line, which has just crossed over the Ichimoku Cloud, marking a good sign for the index.
The overall trend for the index is now bullish, placing the 4,350 and 4,500 areas as the next main bullish targets for the US index.
