As of today, companies in the S&P 500 index are expected to report a combined 6.7% earnings growth for Q2, with most of this surge driven by major tech firms. Seven out of the eleven S&P 500 sector indices have risen, led primarily by the communication services and consumer discretionary sectors.
So far, companies that have already reported earnings have generally met or exceeded last quarter’s forecasts, and market participants have not observed any deterioration in corporate profits or consumer spending. Investors are betting that the economic damage from US tariff policies will be less severe than previously feared. US Commerce Secretary Howard Lutnick stated on Sunday that he is confident the United States will reach a trade agreement with the European Union, even as EU members explore potential countermeasures against the US.
On the negative side, according to the CME Group’s FedWatch tool, traders have largely ruled out an interest rate cut in July and now believe there is over a 50% chance the Fed will cut rates by the September meeting. Additionally, within the S&P 500 index, declining stocks outnumbered advancing ones at a ratio of 1.7.
From a technical standpoint, the S&P 500 appears overbought, with recent highs unconfirmed by retesting. A bearish divergence has formed on the daily timeframe, signaling a likely near-term downward correction toward the 6070 level.
The overall recommendation is to sell SPX.
Profit could be taken at 6070. A stop loss could be set at 6500.
The volume of the opened position should be set so that the value of a possible loss, defined with a protective stop order, does not exceed 1% of your deposit.
This content is for informational purposes only and is not intended to be investing advice.