Executive Summary

The S&P 500 Index has soared to an all-time high, breaking through previous resistance levels and signaling a powerful upward trend. This breakout raises the question: could this be just the beginning of an extended rally? With strong short-term momentum and a robust long-term outlook confirmed by key moving averages, the index is flashing signs of more potential upside. But as with any high-flying market, key support and resistance levels lie ahead, offering both opportunity and risk. Dive in to discover the critical levels to watch and how this historic move could shape the path forward for investors.

The S&P 500 Index, a major benchmark for U.S. equities, has continued its upward trajectory, maintaining a strong long-term bullish trend.

Currently trading around 5,995, the index is showing resilience as it approaches key resistance levels.

The index remains well above its 20-day moving average (green line), reflecting strong short-term momentum.

The 100-day moving average (red line) and the 200-day moving average (blue line) are both trending upwards, confirming a positive long-term outlook.

This alignment across moving averages suggests robust underlying support for the index’s upward momentum.

Looking at resistance, the next key levels to watch are 6,200 and 6,500.

A breakout above 6,200 could open the door for further gains, potentially pushing the index towards the 6,500 level, where we might see some profit-taking given its significance as a psychological barrier.

On the downside, the immediate new support lies around 5,900 which was where we staged a breakout over the past week to a new high. This level is critical as we were trading below it for more than a month and finally a lift off.

Should there be a pullback, a stronger support is found at 5,670, which aligns closely with previous consolidation zones.

A break below 5,670 would indicate potential weakness and could lead to further declines toward the 200-day moving average.

For those looking to enter, a conservative approach could involve waiting for a retest of the 5,900 support level or on any slight dips towards it, with a potential rebound confirming continued strength.

So, how does one take a position in S&P500 Index whereby you are able to reap more potential return to ride the reversal further?

With warrants, one can participate both on the short-term upside as well as downside moves.

For example, if I think the market could head toward the nearest resistance of 6,200, then I can look to buy a call warrant tracking the S&P500 to capitalize on such a move that is less than 3% away.

You can use the Warrant Selector to simulate potential returns with S&P call warrants.

Note: The featured warrants in the table above refer to all warrants quoted on tight spreads (i.e. less than 3 warrant ticks between the bid and offer prices) and the estimated returns are only valid on the date of usage, and may change from day to day.

One can stand to capture potential gains of between 17% to 24%, 6.5 times to 8.9 times more than the S&P’s +2.7% move from here, if the S&P500 futures index went toward 6,200 in 3 weeks.

However, if the index instead took a longer time of 7 weeks to reach 6,200, one of the warrants XP5W would have expired (meaning investors would be unable to maintain the bullish view for this time horizon), while the other warrant – HBHW would make gains of only +1.6%, which is less than the futures’ +2.7% gain.

This is an example of how warrant investors must be aware of their maximum holding period when trading a warrant in order to not see their expected gains completely erode away due to time decay.

If an investors wants to hold these warrants with magnified gains for a longer period of time, the target of the S&P500 will need to be higher. In this case, if the index went 7.7% higher from here to 6,500, the call warrant HBHW will make gains of 64.4% in 7 weeks, more than 8 times of S&P’s move. 

How about trading the downside?

Assuming the S&P pulls back from the key resistance level of 6,500 and I wanted to hedge such a possibility,  I can buy a put warrant instead.

Because the market hasn’t traded to 6,500, I will now use a different tool known as the Warrant Calculator to simulate potential returns of the trending S&P put warrant XT4W expiring in March 2025.

In this case, if I assume the S&P touches 6,500 (and type that in the “Underlying price entry” under the “Target entry variables”, say at the end of this month (updating the “Date” in this case to 29 November 2024), the S&P500 put warrant of XT4W would cost around SGD 0.046.

Next, I will update the underlying target price to the key support level of 5,900 – where I would exit on this put warrant, under the “Target exit variables” section.

From here, I can finally simulate the potential returns using this warrant by moving the exit date. For example, if I move the date to a month after my end-November entry date, the warrant will make gains of 106.5% given the S&P’s 9.2% drop from 6,500 to 5,900.

Similar to the Warrant Selector, I can keep increasing the date to a later date to find out the maximum holding period of using this warrant given my view.

Moving the exit date to 6 Feb 2025, the put warrant is now generating only 10.9% gains. This means, my maximum holding period using this put warrant based on my view that the S&P will pull back 9.2% is, approximately 2.5 months.

The sharing on how one can take a position using warrants has been contributed by Macquarie warrants who is the issuer of these warrants listed on SGX.

About the Author - Joey Choy

Joey is Singapore’s renowned mentor on how to make an income by trading the stock market, an author and one of the most-watched, quoted and followed stock trading trainers in Singapore. Over the years, he has conducted numerous full house seminars, enriching thousands to trade more profitably. 

Joey’s come back story from a S$740k debt has been featured in the Business Times and inspired thousands in Singapore. In less than 3 years, he is highly regarded as one of the Top Tier Remisiers (Stock Brokers) and Traders, bagging numerous yearly awards like Top Trading Representative and Top CFD Achiever every year from 2014 to 2023 in Phillip Securities.

More about Joey here

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