S&P 500 Index Forecast: Falling Yields Help Bulls as Chip Weakness Tests Breakout

Amazon Helps Heat Map But Chips Drag It

The S&P 500 Index is more or less flat at the time of writing. Amazon is up 2.50%, while Alphabet, Apple, Tesla, Lilly, Coca-Cola and Procter& Gamble are giving the Index some support.

What’s dragging is Qualcomm. It’s down around 7.45%. Also Intel is down as well. About 3%. This is after Northland cut it to Market Perform, citing valuation and AI data centre spending concerns. Semiconductors aren’t helping the S&P 500 Index today. They’re taking a breather.

Mixed S&P 500 Index Heat Map As Chip Weakness Offsets Consumer Strength

Healthy Market Breadth

There’s about 59% of stocks trading above their 20-day MA. That’s the kind of support the S&P 500 Index needs. These levels can keep the rally in the Index going as it’s not being held up by a handful of names anymore. Even better would be if the breadth holds in the 60s.

Short Term Market Breadth Improves Above the 50% Line

Rate Pressure Cools

Yields continue to decline with the US 10-year yield now sitting on its 50-SMA on the Renko chart around the 4.45% level. The RSI is below 50 and trending lower to oversold levels while the Z-Score SMA is doing the same. From the Renko it looks like the US 10 year yield could be forming a lower high as bricks, although red, are still above the 50-SMA and the long term 500-SMA. Nonetheless declining yields will help the S&P 500 Index in the medium term so look out for a possible trend change.

Treasury Yields Ease Into Support

Renko Moving Higher

This is clearly a bullish chart. The Supertrend is green, the bricks are above the 50-SMA and 500-SMA. In addition to this the RSI is above 65 with the Z-Score SMA trending higher. You couldn’t want a better looking chart. What I would say is that the RSI is heading into overbought territory and Z-Score SMA is looking stretched. So momentum may cool down in the short term. But that would be presented more like a buying opportunity rather than a shorting opportunity.

S&P 500 Renko Bricks Trending Higher

The Verdict

Current Trend Direction: Bullish

Bias: Positive

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

Resistance Levels: 7,450, 8,150

Medium Term Path: Short term market breadth is looking good. Yields are falling from monthly highs and the S&P 500 Renko bricks are looking astonishing to me. You couldn’t want anything more if you are looking at investing in US equities in my view. The medium term target is the Fibonacci resistance level of 8,150.