SPX Probes Upside Target Zone from 7450-7490 to 7650

The S&P 500 Index (SPX) has extended its rally following the mid-April breakout to all-time highs above 7000, pushing into the 7400s and rapidly approaching an important upside target zone from 7450-7490 to 7650.

The 7450-7490 area represents both the upside count from the mid-2025 breakout and the 100% extension of the October 2022-February 2025 rally projected from the late-March low. Above that, 7650 marks the mid-April breakout target and the 61.8% extension of the April 2025-January 2026 rally projected from the late-March low.

The SPX has displayed exceptionally strong momentum since the late-March low, generating six upside gaps during the advance. From a tactical perspective, the May 6 upside gap at 7294-7273 now represents an important near-term risk management support zone. A decisive move below that gap could signal tactical exhaustion following the sharp 18.1% rally from the late-March low. However, while above the gap, the SPX could continue to push higher into the 7450-7490 to 7650 target zone.

Additional near-term support comes from last week’s low at 7174. Beneath that, more important technical support rests at 7002-6920, which marks prior breakout highs, followed by the rising 26- and 40-week moving averages at 6888-6797.

Overall, the intermediate-term trend for the SPX remains strongly bullish as long as the index continues to hold above its breakout levels and rising intermediate-term moving averages. However, with the SPX now probing major upside targets after a near-vertical advance from the late-March low, monitoring the integrity of recent upside gaps and short-term support levels becomes increasingly important for assessing whether momentum can continue accelerating higher or whether a period of consolidation is needed.

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NDX Achieves and Exceeds Major Upside Targets

The NASDAQ 100 Index (NDX) has continued its powerful advance and has now achieved or exceeded several important upside targets, including 27,700 (upside count for the mid-2025 breakout), 28,324 (100% extension of the October 2022-February 2025 rally projected from the late-March low), and 28,798 (61.8% extension of the April 2025-January 2026 rally projected from the late-March low).

With the NDX pushing into the 29,000s, the focus shifts toward the next major upside target near 29,500, which represents the measured objective from the October-April bullish consolidation pattern.

Momentum remains exceptionally strong. The NDX has produced seven upside gaps since the late-March low, underscoring the persistence of buying pressure throughout the rally. Similar to the recent behavior in the S&P 500, the May 6 upside gap at 28,208-28,065 now serves as an important tactical risk management support zone.

A decisive break below this gap could signal tactical exhaustion following the sharp 28.9% rally from the late-March low with additional near-term support at last week’s low at 27,500. Below that, more important support rests at 26,182-25,835, which marks prior breakout highs, followed by the rising 26- and 40-week moving averages at 25,557-25,177. However, while above the gap, the NDX could extend higher with the next target not until 32,480 (100% extension of the April 2025-January 2026 rally projected from the late-March low).

Overall, the intermediate-term trend for the NDX remains strongly bullish as long as the index continues to hold above its recent breakout zones and rising intermediate-term moving averages. However, after such an extended momentum surge from the late-March low, monitoring the integrity of recent upside gaps and tactical support levels will be important in determining whether the rally can continue accelerating or enters a needed consolidation phase.

NAAIM Exposure Index Rises to Confirm Rally but Approaches Aggressive Positioning

The National Association of Active Investment Managers Exposure Index, which measures active manager positioning in U.S. equities, has continued to rise alongside the rally in the S&P 500 Index from its late-March low. The increase in exposure confirms improving confidence and participation among active managers as the SPX has pushed to new highs.

A slightly crowded long position above 100% during late 2025 into early 2026 preceded the SPX pullback into late March, while the subsequent decline in exposure toward 60% helped unwind overly aggressive sentiment and reset positioning conditions. Since then, the renewed rise in the NAAIM Exposure Index has confirmed the strength of the market recovery.

At 96.7%, however, the indicator is once again approaching more aggressive positioning territory near and above 100%, which historically has tended to coincide with increasingly crowded long exposure among active managers.

Importantly, elevated exposure readings are not necessarily bearish on their own. Strong bull trends can sustain aggressive positioning for extended periods of time. However, as positioning becomes increasingly crowded, the market can become more vulnerable to tactical pullbacks, profit-taking, or periods of consolidation if momentum begins to weaken.

Overall, the NAAIM Exposure Index currently supports the bullish intermediate-term trend by confirming the rally in equities, but the return toward historically aggressive exposure levels suggests sentiment is becoming increasingly optimistic and warrants closer monitoring from a tactical risk management perspective.

Risk: S&P 500 Advance-Decline Line has Not Confirmed the Rally Above 7000

The S&P 500 Index broke out above 7000 in mid-April and has continued higher into mid May. However, the S&P 500 advance-decline line has failed to confirm the move to new highs, creating a negative divergence beneath the surface of the rally.

In our view, this lack of participation above 7000 represents a cautionary signal for the U.S. equity market. While the SPX continues to push higher, the failure of the advance-decline line to confirm suggests that a narrowing group of stocks is driving the advance rather than broad-based participation across the index.

Negative breadth divergences do not necessarily signal an immediate top, particularly during strong momentum-driven advances led by mega cap stocks. However, they can indicate weakening internal momentum and increasing vulnerability to tactical pullbacks or consolidation phases if leadership begins to falter.

This divergence is especially important to monitor given the significant influence of mega cap technology and growth stocks on capitalization-weighted indices. Continued leadership from those “generals” can keep the SPX advancing even as participation beneath the surface narrows. This is the opposite of what occurred earlier this year, when the advance-decline line remained strong while lagging mega caps created a significant overhang for the capitalization-weighted SPX.

Overall, the primary trend for the SPX remains bullish, but the failure of the advance-decline line to confirm the breakout above 7000 suggests that breadth conditions are becoming less supportive and warrant closer monitoring from a tactical risk management perspective.

Risk: Tough to Get a Summer Rally in the Midterm Year of the Presidential Cycle

Seasonality for the S&P 500 Index going back to 1928 generally supports the case for a summer rally, with the June-August period ranking as the second-best rolling three-month stretch of the year. Historically, the SPX has risen 65% of the time during this period with an average return of 3.3%.

However, 2026 represents the midterm year — Year 2 — of the Presidential Cycle, and summer rallies have historically been much more difficult during midterm years. In those periods, the SPX has risen only 50% of the time during June-August with an average return of -0.84%.

Average rolling three-month returns during midterm years tend to remain weak from March-May through July-September, with only modest improvement during the August-October period. More meaningful seasonal strength historically does not emerge until September-November, when the SPX rises 67% of the time with an average return of 3.1%.

After that, seasonality becomes considerably more favorable. Historically, the SPX has risen 83% of the time with an average return of 5.6% during October-December and 75% of the time with an average return of 6.6% during November-January.

Importantly, the strongest phase of the Presidential Cycle tends to begin as the market heads into the midterm year elections in early November. Historically, this transition from late Year 2 into the middle of Year 3 has represented one of the most favorable periods for equities in terms of both consistency and magnitude of returns.

While the primary technical trend for the SPX currently remains bullish, the historical tendency for weaker summer seasonality during midterm years suggests that tactical volatility, consolidation, or pullback risk may remain elevated before the more favorable late-year seasonal window begins.

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