The S&P 500 just blasted through a key technical level, suggesting further stock-market upside to come

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US stocks surged on Monday after Pfizer and BioNtech said a COVID-19 vaccine they developed demonstrated an efficacy rate of more than 90% in its 44,000 patient phase 3 trial.

That move higher in stocks helped propel the S&P 500 above a key technical resistance level: its September 2 high of 3,588. A decisive close above that level would signal a continuation of the current uptrend in stocks and suggest that there is more upside ahead, based on traditional technical analysis principles. 

The bullish move in stocks would need to be confirmed by a consecutive close above the 3,588 level on Tuesday, Fairlead Strategies founder Katie Stockton told Business Insider on Monday.

As of Monday afternoon, the S&P 500 traded at 3,599, paring its gains from its high of 3,645.

According to Stockton, the breakout in stocks generated a measured move price target of 3,825, representing upside potential of 6% from current levels. Stockton pegs an early 2021 time frame for that price target to be reached.

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Market breadth remained strong on Monday, with a number of different sectors and industries surging, like healthcare, industrials, materials, and financials, among others.

And while mega-cap tech FAANG+M names like Apple, Amazon, and Microsoft didn’t participate in much of the upside on Monday, Stockton believes these stocks still “look healthy in absolute terms.”

The potential move higher in stocks lines up with favorable seasonality trends for the S&P 500. Based on historical data, stocks tend to perform better during the November through May months than the June through October months, according to Stifel. 

Investors who have been overtly cautious on stocks due to heightened uncertainty related to last week’s presidential election and rising COVID-19 cases might want to pay close attention to the 3,588 level in the S&P 500, as they may miss out on a substantial rally if stocks can hold above that level.

“If the breakout is confirmed, we would no longer expect a corrective phase of several weeks, but rather would look for Q4 to stair-step higher,” Stockton said.

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