S&P 500 FORECAST:
- S&P 500 begins the week on the front foot, supported by positive sentiment following encouraging results from banks last Friday
- The focus this week will be on earnings from tech giants Netflix and Tesla
- This article looks at key S&P 500’s technical levels to watch in the coming days and weeks
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The S&P 500 traded slightly higher on Monday, supported by a positive mood following benign corporate results from major lending institutions before the weekend and signs that the U.S. economy may be on track to avoid a hard landing.
At the market close, the index was up about 0.4% to 4,522, notching its best close of the year, with technology and financial stocks leading the advance on Wall Street and utilities and real estate names bucking the bullish trend.
Major banks, such as JP Morgan and Wells Fargo, posted hefty profits last quarter despite the difficult backdrop. Management guidance was also constructive, signaling that the worst may be over and that the economy is stabilizing as inflation continues to downshift.
For sentiment to remain upbeat, U.S. companies will need to continue to deliver solid results, especially those in the technology sector. That said, a key litmus test will come on Wednesday, when mega-cap Netflix and Tesla unveil their quarterly numbers.
This year, tech stocks have rallied and re-rated sharply on the back of the artificial intelligence frenzy. To justify premium valuations and sustain their performance, these firms will need to demonstrate earnings resilience and be able to expand margins while growing their top and bottom- lines.
For Netflix (NFLX), markets expect EPS of $2.84 on revenue of $8.27 billion. For Tesla (TSLA), analysts project EPS of $0.79 on sales of $24.29 billion. Check out DailyFX’s earnings calendar for a comprehensive list of companies announcing results in the coming days and weeks.
Source: DailyFX Earnings Calendar
If earnings and forward-looking forecasts fail to impress investors, the recent equity rally could lose steam and set the stage for a moderate correction. This is a risk for the S&P 500 and Nasdaq 100 that should not be overlooked as the second-quarter earnings season progresses.
| Change in | Longs | Shorts | OI |
| Daily | -3% | 3% | 1% |
| Weekly | -13% | 4% | -3% |
S&P 500 TECHNICAL ANALYSIS
If the S&P 500 manages to extend its advance, initial resistance appears at 4,600, near the upper boundary of a short-term rising channel. If bulls manage to push prices above this barrier, we could see a move toward 4,635, the March 2022 highs.
On the flip side, if the index reverses lower and begins to decline, the first support to consider rests near the psychological 4,500 level, followed by 4,415 and 4,365 thereafter.
S&P 500 TECHNICAL CHART
