Watch These Key S&P 500 Levels as Benchmark Index Hits Record Highs

The S&P 500 (SPX) hit a record high on Friday for the first time since February amid optimism about a calmer geopolitical environment and hopes that the U.S. will reach agreements with leading trade partners.

Market participants will be keeping a close eye this week on developments related to trade, budget bill deliberations in Congress and economic data, most notably the June jobs report that is slated to be released on Thursday. U.S. financial markets close early on Thursday and will be shut on Friday for the July 4th holiday.

The S&P 500 dropped as much as 21% between late February and early April before staging a remarkable turnaround that now sees it up 5% since the start of the year. Futures on Monday were pointing to a higher open for the benchmark index, which closed Friday’s session at 6,173.

Below, we take a closer look at the technicals on the S&P 500’s chart to identify key levels worth monitoring.

Flag Pattern Breakout

The S&P 500 has resumed its longer term uptrend after recently breaking out from a flag pattern, a move that sees the 50-day moving average (MA) set to cross above the 200-MA this week to form a bullish golden cross signal.

While the relative strength index entered overbought territory on Friday, the indicator remains well below last year’s July peak following a bullish six-week run, indicating the index has sufficient room to move higher.

Let’s apply technical analysis to the S&P 500’s chart to forecast where the benchmark index may be headed next and also identify support levels that investors will likely be watching.

Bars Pattern Analysis

Investors can forecast where the index may be headed next by using bars pattern analysis, a technique that analyzes prior trends to project future movements.

When applying the tool, we extract the price bars on the chart from late May to mid-July last year and overlay them from the start of the recent flag pattern. This projects a target of around 6,460 and indicates the new move higher may last until early August if a similar trend plays out. We selected this earlier move as it closely mimics the current price action.

Key Support Levels to Watch

During pullbacks, investors should initially watch the 6,050 level. Retracements to this area could attract buying interest near the top of the flag pattern and a minor peak that developed on the chart just below the index’s record high.

The bulls’ failure to successfully defend this important technical level could see a steeper decline to around 5,850. This area, currently sitting in close proximity to the key moving averages, may provide support near a horizontal line that connects a range of corresponding trading activity on the chart stretching back to last October.

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As of the date this article was written, the author does not own any of the above securities.