The S&P 500 is nearing a new all-time high, but analysts are cautious about whether this uptick is solid or just a temporary surge. The index closed just under a record high, marking a rise of less than 1%. If it surpasses this level, it would be the first new high since February, before the market experienced turbulence following President Donald Trump’s tariff policies. Experts are now questioning if the current market rises showcase enough stocks to secure strong long-term investments. If not, while the S&P 500 may soon hit a new record, it might not last very long.
Ari Wald, Head of Technical Analysis at Oppenheimer, expressed a concern: “There’s a very fine line between hitting a peak and experiencing a breakout, and we haven’t observed any signs that indicate this breakout is stable.” He also noted that only 44% of stocks in the Russell 3000 are trading above their 200-day moving average, with less than half showing a consistent uptrend. This situation raises doubts about the market’s sustainability, especially as the S&P 500 approaches this record high. Wald emphasized that for the market to avoid false breakouts, it needs solid backing.
Wald is also keeping an eye on the Russell 2000, which appears to be climbing above its 200-day moving average. He mentioned that positive trends among small-cap stocks could bode well for the broader market as the S&P 500 nears its record. “Small caps play a crucial role in this cycle,” he added. If they can push higher, it might lead to broader market participation and stability.
Others share similar concerns about market leadership. Andrew Shrasher, founder of Thrasher Analytics, pointed out that not all stocks are climbing out of their downturns like the S&P 500. “It’s somewhat of a mixed situation,” he said. “We see some positive indicators, but when we approach those highs, we need to ensure a wider range of participation.”
On the flip side, some believe that the foundation for sustainable growth is in place. Craig Johnson, chief market technician at Piper Sandler, anticipates the S&P 500 reaching 6,600 by mid-October. He referenced moving averages as a potential indicator of new highs. He seemed optimistic about the rally’s future, saying, “I think this rally has legs and can continue.” However, it’s still early, so reaching 6,600 doesn’t necessarily imply the momentum would end there.
Looking at the short term, analysts agree the S&P 500 needs enough momentum to hit its all-time high soon. However, John Kolovos, head of technology strategy at Macro Risk Advisors, highlights a critical question: is the market “recharged” enough to maintain movement beyond its current records? So far, he believes the answer is affirmative. Kolovos noted that typically, the market consolidates before reaching new highs, similarly to the S&P 500’s recent sideways trading.
“The market has undergone a sort of stealth correction over the past month,” he remarked. He suggested that future performance in small caps and overall market expansion could encourage investors to take on more risks, especially with anticipated Federal Reserve rate cuts likely bolstering trader sentiment. Beyond technology, Kolovos sees the financial and industrial sectors gaining traction, which he believes could also help propel the S&P 500 higher. Looking ahead, Wald from Oppenheimer advised that investors should focus on major growth companies that have demonstrated strength during this cycle, as showcased by the recent performance of the NASDAQ 100, which closed at a record level on Tuesday.
