The U.S. stock market rally has gone into overdrive, fueled by AI optimism and euphoria over Iran-war peace hopes, which has brought the S&P 500 to the verge of an important set of technical analysis milestones that could signal an even more aggressive--but also potentially riskier--phase of gains.
The S&P 500 crossed on Thursday above what technical analysts call a Gann Line, which is used to gauge the strength of trends, identify potential market turning points and determine where buyers and sellers may become more prominent.
This particular Gann Line is based on weekly price charts, which are used to dissect longer-term trends, and it has limited the S&P 500's gains since late 2024. Because this is a weekly Gann Line, the close on Friday could be crucial in determining whether the S&P 500 manages to gain a strong foothold above it. It is located near the 7,300 level, according to data supplied by LSEG.
If bulls prevail at the Gann Line, then market watchers will turn their gaze to the 7,334.69 level on the S&P 500, which is 11 times the value of the low struck during the Global Financial Crisis in 2009. The S&P 500 has tended to struggle when nearing multiples of that low.
If the S&P 500 establishes itself firmly above the Gann Line and the 7,334.69 level, then it could ignite an accelerated phase of gains, possibly leading to what is known as a blow-off rally, which is often the last gasp of a bull run before a correction.
However, if the S&P 500 fails to surpass the Gann Line and 7,334.69 and retreats below the May 4 low of 7,174.12, then market expectations would grow for a further decline toward 7,000.
What the chart shows:
