The Zhitong Finance App learned that Bank of America technical analysts insist on long-term gains and believe that the S&P 500 index is expected to rise above 8,000 points, even though a series of recent market and macro headwinds are testing investor confidence. After breaking through the weekly pennant pattern in early August, the benchmark index has successfully hit the Bank of America's previously set target of 7,741 points for the next year. Technical strategist Paul Ciana pointed out in the client report that as long as the index maintains a key support of 7,500 points, the broader upward trend will remain intact; as of press release, the index is around 7,620 points.
Ciana said that recent price consolidation is forming a potential bullish flag on the daily chart, and a decisive settlement above the resistance range of 7760 to 7770 points will confirm this pattern. A successful break through this level will re-open the 8,000 and 8,234 point upward targets, while the long-term forecast is to reach 8541 points.
Although the overall pattern is still constructive, Bank of America warned that short-term confidence has weakened due to conflicting technical and fundamental signals, and emphasized key drag factors such as negative momentum divergence in the Relative Strength Index (RSI), weakening MACD indicators, weak seasonal performance in September-October history, rising US 10-year and 30-year Treasury yields, and rising oil prices.
Ciana warned that failure to hold the 7504 to 7,500 point support area would mark a major technical break and could start an initial retracement to 7314 to 7,294 points. If it continues to weaken, it will increase the risk of a deeper retracement. The rising 200-day moving average will be lowered by about 7,200 points, and it may even fall to the 7,000 point key breakthrough area.
The core source of this macroeconomic pressure is the “double squeeze” between interest rates and oil prices. According to BMO Capital Markets data, the one-month rolling correlation coefficient between WTI crude oil and 10-year US Treasury yields has risen to 0.96 in recent months, the strongest positive correlation since June 2019. As the conflict in the Middle East boosted oil prices, 10-year US Treasury yields rose above 5% on Monday for the first time since October 2023.
GlobalX ETFS investment strategist Billy Leung pointed out that rising crude oil prices can push up inflation expectations, delay the Fed's interest rate cut, and increase the discount rate in the stock and credit markets. Ed Yardeni, president of Yardeni Research, said that if oil prices continue to rise, the Federal Reserve may not only raise interest rates once; it may raise interest rates two to three more times in the future, which will cause unease in the stock market.
Expectations of the Federal Reserve's interest rate hike are heating up, making this macroeconomic pressure even more urgent. According to CME FedWatch data, the probability that the Fed will raise interest rates by 25 basis points in September has reached 89%, which is a sharp double of 38% before the Jackson Hole central bank's annual meeting at the end of August. Goldman Sachs has revised its forecast, changing from the previous forecast of keeping interest rates unchanged to expecting an interest rate hike of 25 basis points in September. The reason is that with the probability of a rate hike in market pricing close to 90%, the Fed will cause sharp market fluctuations. The committee hopes to avoid this situation.