Despite disappointing GDP data from China, stocks edged higher today, with earnings season picking up steam this week. Investors will focus on the second quarter earnings from such SPX names as BAC, MS, and SCHW (7/18/23 release date) and BKR, GS, HAL, IBM, NFLX, and TSLA (7/19/23).
So far, only fourteen (14) S&P 500 names have reported second-quarter earnings. Many S&P 500 names have exceeded second-quarter EPS forecasts, with three SPX misses, including FAST, PEP, and SIVBQ.
Investors will continue to monitor economic and inflation-related data for signs of the end of the Fed's interest rate hikes. The reporting of earnings will become the dominant news and will likely influence the near-to-medium-term directional trends of the stock market.
Based on the explosive rally of 18.74% from the 3/13/23 low (3,808.86), many traders wonder if there is more to the current 4-month SPX rally.
So, how high is high?
It appears on a near-term basis, the next SPX price target or key resistance converges near 4,535-4,582, corresponding to five technical studies, including:
(1) The 78.6% retracement (4,534.63) from the Jan 2022-Oct 2022 decline.
(2) The 9/2/21 high (4,545.85).
(3) The top of the Mar 2023 uptrend channel (4,558).
(4) Jun/Jul 2023 ascending triangle breakout target (4,569).
(5) The late-May 2023 head/shoulders bottom or ascending triangle breakout projection (4,582).
Although SPX can trend higher over the intermediate-to-longer term, another overbought condition is developing into the rally, as evidenced by the RSI (71.41) approaching overbought conditions (70s). A strong trend can still lead to SPX overshooting as the RSI indicator (71.35) reached a previous high of 76.46 in mid-Jun 2023. The RSI indicator trading into the mid-70s translates to an SPX target closer to 4,535-4,582.
Nonetheless, an overbought condition coupled with the failure of SPX to convincingly clear resistance at 4,535-4,582 warns of another consolidation.
Initial support rises to 4,444-4,463/4,423 (7/12/23 gap-up and the ascending triangle breakout/bottom of Jun/Jul 2023 ascending triangle) and below 4,322-4,328 (bottom of Mar 2023 uptrend channel and 6/26/23 low), and the 50-day ma (4,293).
A breach of the shorter-term moving average warns of a deeper correction to 4,195.44 (May 2023 h/s bottom or ascending triangle breakout) and below 4,104 (5/24/23 higher low to the Mar 2023 uptrend channel), 4,035-4,049 (Apr/May 2023 lows and 200-day ma). Below 200-day ma warns at a retest of the Mar 2023 low (3,808.86).
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