This technical analyst sees upside for S&P 500 in Q1

Investing.com -- Bank of America technical strategist Paul Ciana says the S&P 500 could push higher in the first quarter, supported by improving market breadth and sector rotation.

In a note to clients on Tuesday, Ciana explained that an “uptrend continuation pattern still favors a rally to 7,168 / 7,206,” with medium-term targets near 7,430 and what Ciana called a “frothy upside level around 7,741.”

He cautioned that “SPX upside remains but dependent on more sector rotation + breadth,” noting that mid-caps, small-caps and transports are strengthening while the Nasdaq 100 “consolidates.”

BofA believes breadth is “improving, modestly,” with more stocks trading above key moving averages.

The analyst added that 2026 fits into a longer bullish framework. According to BofA, the “secular bull market overlay aligns 2026 with 1991 and 1956,” which were both choppy but constructive years.

The bank expects the secular bull “to extend into the late 2020s or early 2030s,” though it also flagged a “pivotal peak in 2026” before a corrective phase.

Rotation remains a major theme. BofA said sectors “are still rotating in favor of Materials, Industrials, Energy, Financials, Discretionary,” while technology is “losing favor vs the S&P 500.” Utilities continue to lag as long-term Treasury yields rise.

Ciana also highlighted breakouts across the Russell 2000, mid-caps and transports, arguing that Dow Theory “is shifting bullish” as transports strengthen.

Still, the strategist warned of key downside levels. A drop below 6,899 / 6,815 “would signal a wedge top,” while Year 2 of the U.S. presidential cycle “tends to underperform in H1,” making the near-term path potentially uneven.

You May Also Be Interested In