🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

BofA: Stocks eyeing relief rally around election, SPX could hit 6,000 by year-end

Published 11/05/2024, 05:29 AM
© Reuters
US500
-
VIX
-
VIX3M
-

Investing.com -- The S&P 500 could stage a “relief rally” in the coming period, Bank of America strategists said, citing the index’s historically strong performance in early November during presidential election years.

In a Monday note, strategists noted that traditionally, the S&P 500 has shown strength in the first 10 days of November during election years, with an average return of 1.06% and a median return of 1.36%.

“The average return is the third best and the median return is the second best of any first or last 10 day period of the election year,” BofA strategist Stephen Suttmeier wrote.

He also pointed to the current oversold condition of the 3-month VIX relative to the VIX (VIX3M/VIX), which is below 1.0. This sentiment indicator, which reflects market fear, has shown similar trends before the 2020 and 2016 Presidential elections.

“This suggests taking a contrarian bullish view on the US equity market and favors a rally into year-end,” Suttmeier added.

Despite a pullback from its mid-October record high of 5878.46, the S&P 500 is maintaining a pattern that could indicate continued bullish momentum.

If the index holds above key support levels, including the rising 50-day moving average at 5703 and a Demark level at 5695, the bullish trend from July to September could remain intact. This could set the stage for potential gains, with targets at 5930 and 6180, the strategists highlighted.

Furthermore, BofA's examination of long-term price momentum, as measured by the 28-month Williams %R (WLPR), suggests that the S&P 500 is likely to remain overbought for the rest of 2024.

In the past 22 years, whenever WLPR was overbought in the first 10 months, it remained so for the entire year. Suttmeier anticipates that 2024 could follow this trend, with average and median fourth-quarter and November-December returns ranging from 4.2% to 5.5%, supporting a year-end target for the S&P 500 in the 5940s to 6070s range.

In presidential election years when monthly WLPR has been consistently overbought, the S&P 500 has also performed well in the fourth quarter and November-December, with average and median returns between 4.9% and 6.8%.

This data supports BofA's expectation for the S&P 500 to potentially reach levels between 5980s and 6150s by year-end, aligning with the bullish patterns observed from July to September.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.