- Nvidia just helped power the stock market above a key resistance level, suggesting more upside ahead.
- According to Fairlead Strategies' Katie Stockton, the S&P 500 needs to close above 4,155 on Friday to confirm a bullish breakout.
- Stockton sees the S&P 500 trading 8% higher from current levels if the strength continues.
The stock market can thank Nvidia's eye-popping rally this week for helping it clear a key resistance level that suggests more upside ahead, according to a recent note from Fairlead Strategies' founder Katie Stockton.
Stockton highlighted last week that the S&P 500 cleared an important resistance level at 4,155, and that a bullish breakout would be confirmed if the index managed to hold about that level at the end of this week's trading session.
While stocks languished for much of the week, falling back below that key resistance level and threatening the bullish breakout amid uncertainty surrounding the fast-approaching debt-ceiling deadline, that weakness was quickly reversed on Thursday thanks to Nvidia.
Nvidia stock soared as much as 30% on Thursday after it's jaw-dropping earnings guidance highlighted that the hype surrounding generative artificial intelligence is translating into big revenue gains, and the broader tech sector has surged in unison.
"Yesterday's rebound gives the S&P 500 a better chance of confirming last week's breakout above cloud-based resistance [of] 4,155," Stockton said.
Now the S&P 500 is trading well above its key resistance level at 4,155, with the index just below 4,200 in Friday afternoon trading, all but confirming that a bullish breakout has occurred.
And that means more upside ahead for the broader stock market is likely, according to Stockton, who highlighted 4,310 and 4,510 on the S&P 500 as key resistance levels to watch. A rise to those levels implies potential upside of 3% and 8%, respectively.
"A decisive breakout would be a bullish development with a duration of three to four months," Stockton said. "A compelling upside objective of ~4,510 could be derived from a subsequent breakout above February's high based on a measured move projection."
Stockton also highlighted the upside move in semiconductor stocks on Thursday, thanks to Nvidia's monster rally, which has bullish implications for the sector as a whole. And that strength should continue even if Nvidia stock takes a breather and gives up some of its recent gains.
The semiconductor index "has room to intermediate-term overbought territory with resistance initially ~$142 and then ~$159," Stockton said, representing potential upside of as much as 10% from current levels.