By Paul R. La Monica

The stock market is suddenly on an early spring hot streak. The S&P 500 has already broached a key technical level that could indicate even more bullish times are ahead -- and the index is inching closer to topping another critical area of support, as well.

The S&P 500 closed above its 50-day moving average on Thursday for the first time in about three months. That's the average closing price of the index over the past 50 trading days. When the S&P 500 is above that level, it's considered a positive short-term sign for the markets. There is upward momentum for stocks.

"The breakout suggests the relief rally can extend into mid-May," said Katie Stockton, founder and managing partner of Fairlead Strategies, in a report Friday.

But there are questions about whether or not getting back above the 50-day moving average is even that great of a sign in the first place. While many on Wall Street tout that it's a bullish indicator, analysts at Bespoke Investment Group note that this may not necessarily be the case.

"Looking just at the S&P 500's performance since 2000, when it ended prior streaks of at least two months below the [50-day moving average], it wasn't particularly impressive. Usually, the S&P 500 declined in the weeks and months ahead with mostly negative returns on an average and median basis," the Bespoke analysts wrote in a Friday note.

Still, that's not to say that the recent mini-bull run is destined to end soon. Many technical strategists look more closely at the 200-day moving average for the S&P 500, which is calculated from the closing levels of the S&P 500 over the prior 200 trading days. There are healthy signs in that regard, too.

The S&P 500, now trading at around 5685 after its recent winning streak, is less than 1% below the 200-day moving average of about 5745.

Stocks have enjoyed a stunning turnaround since early April, when the announcement of President Donald Trump's tariff plans sent the market into a tailspin.

"Almost all of the post-Liberation Day losses have been totally recouped, said David Rosenberg, founder, chief economist and strategist for Rosenberg Research, in a report Friday. "The 200-day trendline...is the next key test."

The market seems to be heading in that direction. But investors may need to be patient -- and brace for more volatility.

"Levels in the S&P back to where we were will take time. Even the Covid V-bottom took two months to get back to its 200-day moving average," said Jay Woods, chief market strategist at Freedom Capital Markets in a report this week, referring to the brief bear market in 2020.

The Bespoke analysts added that "while the index's short-term downtrend has been broken, it still faces upside resistance at the 200-DMA and the mid-March high when it last failed to rally back above that long-term moving average." In other words, the S&P 500 could have a tough time cracking the 5745 level.

Of course, technical analysis is just one tool for traders to use when trying to figure out the market's direction. Investors -- especially those with an eye on the longer-term -- also need to keep a close watch on earnings, valuations, and the economy.

Stocks aren't cheap, but the market seems to be betting that concerns about a trade war and tariffs could be short-lived, companies will continue to report decent earnings growth, and that the Federal Reserve will begin to cut interest rates again later this summer.

If all that happens, the S&P 500 could once again test -- and perhaps even surpass -- its 200-day moving average.

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.

(END) Dow Jones Newswires

May 02, 2025 13:22 ET (17:22 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.