3 ways the stock market is showing technical strength lately and how to know if it will last

The S&P 500's recent rally is characterized by strong breadth, evidenced by multiple +90% breadth days, and low two-way volatility, with May recording few 1% losses. The index has also successfully leveraged bullish chart patterns, achieving an initial upside target of 5,840 and establishing new targets at 6,125 and 6,555, suggesting a strengthening market foundation if these patterns continue to resolve to the upside.

Analysis

The S&P 500's recent rally exhibits compelling technical strength, characterized by three key factors. Firstly, strong market breadth is evident, with a recent trading session closing near highs and achieving over +90% breadth. This marks the S&P 500's fourth 90% breadth day since the April 7 low, a significant occurrence given the index is now over 20% above that low point, contrasting with only two 90% down days in the same period. This "strength begetting strength" is further underscored by the S&P 500's Cumulative Advance-Decline Line reaching a new all-time high on May 2nd, suggesting robust participation and that the majority of index constituents weathered the prior downturn better than perceived. Secondly, the market is experiencing low two-way volatility; May has seen three 1% gains against only one 1% loss so far, a level of calm not seen since November 2024 and reminiscent of the persistent uptrend conditions of the previous year, which yielded a 23% annual gain. This contrasts sharply with earlier 2025 volatility, where two consecutive months saw at least ten absolute 1% moves. Thirdly, the S&P 500 has successfully leveraged bullish chart patterns, hitting an initial upside target of 5,840 – the first successful bullish pattern since December 2024, following three consecutive failures. With bearish patterns ceasing to work effectively since the first week of April and new upside targets of 6,125 and 6,555 now in play, the market's foundation appears to be strengthening, contingent on continued positive resolution of digestive periods. The provided signals reinforce this, indicating a strongly positive sentiment (0.85 score) and a bullish tone for this market commentary.

Key Decisions for Investors

• Investors should monitor for the continuation of strong market breadth, specifically further instances of high positive breadth days (such as +90%), as a key indicator of sustained rally participation.
• The current low two-way volatility, particularly the limited number of 1% down days observed in May, supports a healthier market trend; a significant increase in downside volatility or frequent 1% losses could signal a shift in the prevailing market character and warrant caution.
• Given the successful breakout from recent bullish patterns and new upside targets of 6,125 and 6,555 for the S&P 500, investors might consider maintaining or cautiously increasing exposure, while closely watching if subsequent consolidation phases continue to resolve to the upside, as this is presented as crucial for achieving these higher targets.