Bank of America: S&P 500 is forming a bullish flag during consolidation, with a long-term target still above 8,000 points

According to information from Zhihu Finance APP, Bank of America technical analysts remain bullish on the long-term upward trend, believing that the S&P 500 Index may rise above 8,000 points, despite a series of recent market and macroeconomic headwinds testing investor confidence. After breaking out of a weekly triangle pattern at the beginning of August, the benchmark index has already successfully reached Bank of America's previously set 12-month target of 7,741 points. Technical strategist Paul Ciana noted in a client report that as long as the index holds the key support at 7,500 points, the broader upward trend remains intact; as of press time, the index was around 7,620 points.

Ciana stated that recent price consolidation is forming a potential bullish flag on the daily chart, and a decisive close above the resistance area of 7,760 to 7,770 points would confirm this pattern. A successful breakout above this level would reopen the upside targets of 8,000 and 8,234 points, with a long-term forecast of up to 8,541 points.

Although the overall outlook remains constructive, Bank of America warns that short-term confidence has weakened due to conflicting technical and fundamental signals, emphasizing several key drag factors: negative momentum divergence in the Relative Strength Index (RSI), weakening MACD indicator, historically weak seasonal performance in September and October, rising yields on 10-year and 30-year US Treasury bonds, and higher oil prices.

Ciana cautioned that failure to hold the 7,504 to 7,500 point support area would signal a significant technical breakdown, potentially triggering an initial pullback to 7,314 to 7,294 points. If weakness continues, there will be a heightened risk of a deeper correction, with a move down to the upward-sloping 200-day moving average around 7,200 points, or even to the critical breakout area at 7,000 points.

The core source of this macro pressure is a "double squeeze" formed between interest rates and oil prices. BMO Capital Markets data shows that the one-month rolling correlation coefficient between recent WTI crude oil prices and the 10-year US Treasury yield has risen to 0.96, the highest positive correlation since June 2019. As Middle East conflicts drive up oil prices, the 10-year US Treasury yield briefly surpassed 5% on Monday, its highest since October 2023.

Billy Leung, investment strategist at Global X ETFs, pointed out that rising crude oil prices can boost inflation expectations, delay Federal Reserve rate cuts, and simultaneously increase discount rates in both equity and credit markets. Ed Yardeni, president of Yardeni Research, said that if oil prices continue to rise, the Federal Reserve may not stop at just one rate hike and could raise rates two or three more times in the future, which would be an unsettling factor for the stock market.

The intensification of expectations for further Federal Reserve rate hikes makes this macro pressure even more urgent. CME FedWatch data shows that the probability of a 25-basis-point rate hike by the Federal Reserve in September has reached 89%, more than double the 38% probability before the Jackson Hole central bank symposium at the end of August. Goldman Sachs has revised its forecast, now expecting a 25-basis-point hike in September instead of a rate hold, citing that with market pricing the probability of a hike close to 90%, standing pat could trigger market volatility, which the committee wants to avoid.