The S&P 500 closed above its closing high hit last October, a technical breakout that could spark more buying, chart analysts and traders said. How much buying, though, is subject to debate.
It could go “a lot higher,” said Dennis Gartman, whose The Gartman Letter is usually filled with analysis of charts. “I’d like to see a bit more volume, but I’ll take what I can get.”
Now at the highest since July, the benchmark leaves behind a 2 ½ month trading range it was trapped in as concerns about the European financial crisis continued to push it down.
The market is pricing in an improvement in the U.S. economy and good results in the upcoming earnings season, traders said.
“We are probably looking at new all-time highs on the S&P 500 by the end of the year,” said Adam Grimes, chief investment officer for Waverly Advisors.
“There is significant technical support and justification for such a rally, and we are now in area that justifies a more aggressive stance on risk, as opposed to our hands-off attitude of the past several months.”
Alcoa, the first Dow Jones Industrial Average member to report 4th quarter results, kicked of the earnings season right, gaining after it predicted strong aluminum demand this year.
The PowerShares QQQ Trust , which tracks the tech-heavy Nasdaq-100 Index, is about 1 percent from breaking out to a new high. A breakout by the more volatile security could mark a true return to the risk trade.
“Look at the QQQ's for an animal spirits gauge,” said Josh Brown, a trader with Fusion Analytics and author of the popular Reformed Broker blog. “The more times it tries to break through, the bigger the eventual breakout.
If it breaks $59 to $60, this is a new 11-year high and the whole market will go crazy.”
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NEW SLIDESHOW: The Biggest Momentum Stocks of 2011: Buy or Sell?
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