By Paul R. La Monica

This month's stock market rally isn't just a good sign because it stems from positive global trade developments. Bulls should also be celebrating the S&P 500's move above its 200-day moving average, an important technical milestone, on Monday.

The S&P 500 is hovering around 5900 and is back in positive territory for the year. The index's 200-day moving average -- which is the mean of the closing prices for the past 200 trading days -- is about 5755. The fact the S&P 500 is now comfortably above that level is a good omen for the broader market; it shows that stocks have positive momentum.

"This brings new all-time highs back into the picture," said Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report, in a report Monday. Crossing the 200-day moving average is "a major technical buy signal," he wrote, adding that he thinks the index's 52-week low of 4835 on April 7 "was the final low for this cycle."

So what happens next? The market could continue to rally and might not face any major resistance until it approaches, or tops, the all-time high of 6147 from mid-February for the S&P 500.

Jason Hunter, technical strategist with JPMorgan Chase, said in a report Tuesday that recent history shows stocks could keep rallying now that they've bounced back from their plunge since President Donald Trump announced broad global tariffs.

"Each time the market closed above [the 200-day moving average] threshold after a correction or bear market period since the mid-1990s, the index saw a continuation of the rally in the weeks and even months ahead, Hunter wrote.

With that in mind, he says the 6125-6170 range for the S&P is "a potential upside target zone." The caveat for that, of course, is if there is "a clear trend deceleration...or headlines that risk whipsawing the renewed bullish market sentiment."

History suggests the market could even surpass the previous peak and go on to a new record high. According to data from Adam Turnquist, chief technical strategist for LPL Financial, the S&P 500 has enjoyed an 8.6% gain on average over the next 12 months once it surpassed its 200-day moving average. An increase of that magnitude from the current 200-day moving average would imply the index could hit nearly 6270 in the next 12 months.

Turnquist said that the recent trade deal progress "has led to a likely peak in investor fear and policy uncertainty."

Along those lines, the Cboe Volatility Index, or VIX, a measure often referred to as Wall Street's fear gauge, has tumbled from a heightened level of above 50 in early April all the way back to just over 18. The slide in the VIX -- coupled with a move above the 200-day moving average for the S&P 500 -- typically bodes very well for stocks.

"When a VIX streak above 20 ended and the S&P was at least 1% above its average, future returns improved significantly," said Jason Goepfert, senior research analyst with SentimenTrader, in a report Wednesday.

Other strategists also suggest the market's swift rebound may be far from over. That's because the move back above the 200-day moving average has happened so quickly that investors may still need to unwind bets in more conservatively-oriented assets, such as gold, dividend stocks and bonds.

"Wall Street is arguably still more defensively positioned, which could cause further buying," said Keith Lerner, co-chief investment officer and chief market strategist at Truist Advisory Services, in a report Monday.

But what about more downside? Experts are hopeful that even if stocks do pull back again, they won't return to early April's lows.

Christian Chan, chief investment officer with AssetMark, told Barron's that 5200 might be a new bottom for the S&P 500. But he says stocks "should grind higher" as long as corporate earnings growth is solid and worries about persistent inflation and a recession diminish.

In other words, the stock market is unlikely to hit new lows unless the stagflation fears that were prevalent on Wall Street last month return with a vengeance.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 14, 2025 12:23 ET (16:23 GMT)

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