2025 Technical Forecast for U.S. Equities
As of December 2024, the S&P 500 has experienced a remarkable 27% gain throughout the year, culminating in a two-year increase of 57%. This performance marks the largest two-year gain since 1997-1998, which saw a 68.49% rise before a significant pullback in 2000 due to the tech bubble burst.
S&P 500 Analysis
The recent rally in equities has been largely driven by expectations of rate cuts, which began to be priced in around September 2024. The only decline in the S&P 500 over the past six years occurred in 2022, when rate hikes led to a 20% sell-off, erasing most gains from 2021.
Similar to the tech-driven market of the late 1990s, the current rally has been fueled by optimism surrounding Artificial Intelligence (AI). Notable stocks like NVIDIA have seen dramatic increases, with NVIDIA rising from a split-adjusted $15 in November 2022 to $150 two years later, showcasing a tenfold return.
SPX Yearly Chart
Support Levels for S&P 500
Looking ahead, several key support levels are identified for the S&P 500:
- First Support Level: Around 5775, which marks the close prior to the U.S. Presidential election.
- Second Support Level: A prior resistance level that has not been retested, approximately 5,638-5,669, about 7% away from current prices.
- Third Support Level: A zone around 5,340-5,400, which is about 11% away from current prices and has seen little prior price action.
Nasdaq 100 Analysis
The Nasdaq 100 has outperformed the S&P 500, gaining over 100% from the 2022 lows, compared to the S&P's 74% increase. This performance mirrors the late 1990s, where the Nasdaq saw significant gains leading into 1999.
NDX Weekly Chart
Support Levels for Nasdaq 100
For the Nasdaq 100, three support levels are highlighted:
- First Support Level: 20,673, which is the 161.8% extension of the 2022 sell-off, about 5% away from current prices.
- Second Support Level: The 20,000 level, a significant point of contention last year, currently about 8% away.
- Third Support Level: A range from 18,271-18,416, more than 15% away from current prices.
Conclusion
As we approach 2025, the technical outlook for U.S. equities remains cautiously optimistic, with key support levels identified for both the S&P 500 and Nasdaq 100. Investors are advised to monitor these levels closely as potential pullbacks may present buying opportunities in a market characterized by high valuations and tech-driven enthusiasm.