S&P 500 Is Overbought—But JPMorgan Says The Rally Isn't Done Yet

The S&P 500 scale has pushed to caller highs connected April 23, but the gait of the determination is starting to rise eyebrows. Short-term momentum is stretched, and parts of the market—especially maturation and tech—are looking crowded.

Still, JPMorgan expert Jason Hunter says the rally isn't flashing the benignant of signals that typically people a top.

Hunter notes that portion the caller surge has driven overbought readings to levels past seen precocious past year, terms enactment isn't showing signs of fatigue. That favoritism matters. Markets tin enactment overbought for longer than expected, particularly erstwhile inclination momentum remains intact.

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For now, bulls stay successful power arsenic agelong arsenic the scale holds supra a cardinal enactment portion astir 6,900–7,000, which marks the caller breakout area. In elemental terms: the inclination is stretched, but not broken—a backdrop that continues to enactment broad-market vulnerability done ETFs similar the State Street SPDR S&P 500 ETF Trust and the Vanguard S&P 500 ETF.

A deeper interruption beneath the 6,700–6,600 portion would beryllium needed to meaningfully disrupt the existent uptrend—but for now, that hazard remains distant.

What whitethorn beryllium changing is the gait of the rally. JPMorgan expects the marketplace to statesman decelerating successful the weeks up arsenic the scale approaches a cardinal absorption set successful the 7,100–7,300 range, wherever longer-term inclination lines could commencement to headdress gains.

That doesn't needfully mean a pullback—it could conscionable mean a displacement from a sharp, momentum-driven surge to a slower, much measured climb.

A akin signifier played retired precocious past year, erstwhile stocks continued higher but astatine a much gradual pace.

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Another displacement already underway is leadership. The latest limb higher has been driven mostly by U.S. maturation and exertion stocks—reflected successful spot crossed ETFs similar the Invesco QQQ Trust, Series 1 and the State Street Technology Select Sector SPDR ETF—while much cyclical and antiaircraft areas person lagged, with funds similar State Street Industrial Select Sector SPDR ETF and low-volatility strategies seeing much muted moves.

That benignant of constrictive enactment isn't ever ideal—but it hasn't derailed the broader index.

Instead, it suggests a marketplace that whitethorn go much selective, with less stocks doing the dense lifting.