S&P 500 Forecast: Breadth Improves as Falling Yields Offset Broadcom’s AI Shock

Mixed Heat Map But No Panic

Broadcom is the problem here, down more than 14% after its AI chip sales outlook failed to clear analysts’ targets. That move spread into the chips group with Micron down 5.81%, AMD down 3.38% and Qualcomm down 3.76%.

But there’s help. Alphabet is up 3.48%, supported by fresh AI/cloud optimism around Google’s Gemini enterprise push, while Eli Lilly is up 5.32% as investors continue to chase the GLP-1 and broader drug pipeline story. Financials are also surprisingly helping with the lifting with JPM, AXP, MS, WFC and C all above 3%. Seems that traders are rotating back into financials.

Financials And Healthcare Offset Chip Weakness

Short Term Market Breadth Points Higher

Very quietly we see market breadth making a nice thrust. Almost 60% of S&P 500 Index stocks are above their 20-day moving average. So it’s not just a handful of stocks moving the market. The rally in the Index has become alot more broad based. This is a very healthy sign for the Index. What’s even better is that there’s more room to go as the overbought level for this breadth indicator is about 10% higher from here.

S&P 500 Index Short Term Market Breadth Builds

10-Year Yield Pullback Helps Bulls

One of the reasons that financials may be rallying today is the movement in the yields. The US 10-year yield is below its 21-EMA, 50-SMA, as well as the Supertrend line, which has flipped negative. Positive momentum has been trying to show itself but it has been very weak. But still, the Z-Score SMA is trending higher, so we must take note of that. The RSI is below 50 and trending lower. Hopefully, the declines in the US 10-year yield continue, and it moves toward the 500-SMA for a quick test.

US 10-Year Yield Tests 4.45%

Green Bricks Return on S&P 500 Index Renko

We see a return of green bricks as it glided off the 21-EMA and Supertrend line. The RSI is pointing higher and above the 50 level while the Z-Score SMA is looking to turn higher. From looking at the Renko the S&P 500 Index is poised to restart its rally towards 8,150 after making a higher low.

Upmove On S&P 500 Index Returns

The Verdict

Current Trend Direction: Bullish

Bias: Positive

Support Levels: 7,240, 6,780, 6,310

Resistance Levels: 8,150, 9,280

Medium Term Path: It appears as though the S&P 500 is positioning itself to make another leg higher. There’s a prospective higher low on the Renko and the short term market breadth indicator, percentage of stocks above the 20-day SMA, is almost 60%! That’s very good to note. We may see the 8,150 target level reach sooner rather than later.