Trading S&P 500 Index

Research Notes January 2026 > https://www.unum.capital/post/rjan2026

Trade Local & Global Financial Markets with Unum Capital.

To get started, email tradingdesk@unum.co.za

Closing Price: 7,005

1D Change: +0.33%

Multi-Frame Action: 🟢 Parabolic (D) 🟢 Breakout (W) 🟢 Vertical (M)

Technical Upside: Blue Sky Breakout. Confirmed breach of the psychological 7,000 barrier.

Target: 7,200 – 7,400. Momentum Extension.

Momentum Signal: "Lock-Out" Extreme. Monthly RSI at 99.77. Daily RSI at 95.96.

Risk / Invalidation: Close below 6,850 (Previous Breakout Shelf).

REWARD-TO-RISK ASSESSMENT

• Long (Buy) Reward-to-Risk: 🟢 High (Momentum / Chase). While statistically overextended, the "Lock-Out" signal (RSI > 95) implies a liquidity vacuum where prices can overshoot significantly. The trend is vertical, favoring the aggressor.

• Short (Sell) Reward-to-Risk: 🔴 Very Poor. Fighting a vertical trend with Monthly RSI near 100 is highly dangerous. There is no bearish divergence or reversal candle to justify a fade.

Valuation Basket: Broadening Momentum / Passive Inflow Squeeze

Primary Driver: The breach of 7,000 has triggered a "Melt-Up," forcing under-allocated funds to chase performance in a liquidity vacuum.

MARKET STRUCTURE & VOLUME VALIDATION

Volume Profile: The price action into the 7,000 level has been relentless and vertical. The daily chart shows a clean sequence of higher highs with very shallow pullbacks, characteristic of a "buy the dip" algorithmic regime. The ability to hold above 7,000 immediately after testing it suggests strong absorption of any profit-taking.

Liquidity Zones:

• Support: The 6,800 – 6,850 zone is now major structural support (previous all-time highs). Immediate intraday support sits at 6,950.

• Resistance: None. The index is in price discovery mode. The next psychological magnet is likely 7,200 or 7,500 based on Fibonacci extensions of the previous impulse legs.

Divergences: None. Price and Momentum are accelerating together. The Monthly RSI hitting 99.77 is a statistical anomaly that confirms a "super-cycle" extension where valuation metrics are temporarily irrelevant compared to flow dynamics.

MOMENTUM PROFILE (WEEKLY & MONTHLY)

Tactical Momentum: Extreme Overbought (Lock-Out). The Daily RSI is at 95.96, indicating that the market is "pinned" to the upside. In a parabolic move, this signal often persists for longer than rational analysis would suggest, forcing shorts to capitulate.

Structural Trend: Bullish Acceleration. The Weekly RSI is at 80.71, which is high but noticeably "cooler" than the daily/monthly readings, suggesting the intermediate trend still has room to expand before reaching the same extremes as the shorter timeframes.

Primary Trend: Parabolic. The Monthly chart is effectively vertical. The RSI reading of 99.77 is the highest in the provided dataset (dating back to 2014), signaling a historic momentum event.

CORE THESIS The S&P 500 has entered a "Melt-Up" phase. The breach of 7,000 is a significant psychological victory for bulls, and the "Lock-Out" momentum readings (Monthly RSI > 99) suggest that the market is currently being driven by a scarcity of sellers and aggressive FOMO (Fear Of Missing Out). While a mathematical reversion to the mean is inevitable eventually, the current structure is vertical and powerful. The strategy favors holding long exposure and using any intraday volatility to trail stops higher, rather than attempting to pick a top in a blue-sky breakout.

Lester Davids

Senior Investment Analyst: Unum Capital