Last week, the S&P 500 repeatedly hit new all-time highs before traders left for the long Independence Day weekend. In the coming days, stock market volatility is likely to increase, while technical indicators point to a potential pullback. The nearest downside target is the January-February peaks around 6,160, from which a new S&P 500 rally wave could begin. Fundamental factors continue to favor buyers of US stocks.
Despite the approaching July 9 deadline and the lack of signed trade agreements between the United States and most other countries, investors aren't panicking. On the contrary, they continue increasing long positions in American securities. According to Reuters, US equity ETFs attracted $31.6 billion last week, which is the highest weekly inflow since November 2024.
One of traders' key reasons for optimism is the weakening dollar trend. According to JPMorgan estimates, a 10% drop in the currency's value boosts profits of American multinational corporations by 15–20%. A weaker dollar makes these companies' goods and services more competitive in the global markets. Additionally, it becomes more profitable to convert foreign currency revenues back into dollars.
Some concerns stem from the S&P 500 already trading at record highs, making further gains harder to achieve. The upcoming second quarter earnings season (starting late this week) could provide support. Morgan Stanley analysts expect another upward revision to US corporate profit forecasts. Since April, earnings expectations have improved from -25% to -5%, and may soon turn positive, which would become a powerful catalyst for stocks.
RSI and Stochastic indicators suggest a high probability of an S&P 500 pullback. For long positions, the 6,160 area could be attractive, with 6,300 as a potential target.
Consider the following trading strategy:
Buy S&P 500 near the level of 6,160. Take profit — 6300. Stop loss — 6050.
This content is for informational purposes only and is not intended to be investing advice.
