The S&P 500 (SPX) enters 2025 on its best two-year run since the late 1990s.

The large-cap index rose 23% gain last year after surging 24% in 2023, as the artificial intelligence (AI) boom and first interest rate cuts since 2020 helped drive stocks higher.

While the AI narrative and expected rate cuts will likely continue to support large-cap stocks over the next 12 months, investors will also be closely watching the impact of the incoming Trump administration’s policies, particularly in relation to tariffs, while also monitoring geopolitical tensions in Russia and the Middle East.

The S&P 500, which closed out 2024 on a four-session losing streak, was up 0.5% at 5,910 in the opening minutes of trading Thursday.

Below, we take a closer look at the S&P 500’s chart and identify important technical levels that investors may be watching as the first quarter gets underway.

Head and Shoulders Pattern Emerges

Since early November, the S&P 500 has formed a peak, a higher peak, and then a lower peak, carving out a head and shoulders pattern, a classic chart formation that indicates a potential market top.

Moreover, the index fell below the closely watched 50-day moving average last week, though recent selling has occurred on lower-than-average end-of-year trading volume.

Let’s take a closer look at three major levels where the S&P 500 could encounter support during pullbacks and also point out several key overhead areas to monitor if the index resumes its longer-term uptrend.

Major Support Levels to Watch

Firstly, it’s worth keeping an eye on the 5,875 level. This location on the chart could provide support near the head and shoulders’ neckline that joins the October peak with troughs that formed in November and December.

A decisive breakdown below this area would confirm the head and shoulders top and could see a decline to the next lower support level around 5,670. Investors who trade the index may look for buying opportunities in this region near the prominent July swing high and early-October low.

Further downside opens the door for a retest of the 5,445 level, a location likely to attract support near a trendline that links a range of similar chart points between June and September.

Key Overhead Areas to Monitor

If the S&P 500 resumes its longer-term uptrend, investors should initially monitor the 6,090 area. This level may may provide overhead resistance near the upper range of a week-long consolidation period that formed shortly after the index reached its all-time high (ATH) in early December.

To forecast a bullish price target above the ATH, investors can apply the bars-pattern tool. This technique involves extracting the price bars that comprise the post-election rally from early November to early December and repositioning them at the head-and-shoulders’ neckline, which forecasts a target of around 6,290.

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As of the date this article was written, the author does not own any of the above securities.