S&P 500 outlook: Stock markets turn red – London Business News | Londonlovesbusiness.com

The major indices ended yesterday’s trading with slight declines.

Wednesday trading session started with clear weakness as the S&P 500 fell by about 8.67 points or 0.2% to 5502 points, the Dow Jones is trading at 40268 points, and the Nasdaq dropped by about 10.22 points to 17997.35 points.

Traders are preparing for earnings reports from tech giants.

Wall Street continues to assess the latest second-quarter earnings reports, with Alphabet, Google’s parent company and Tesla set to report after today’s trading session. In my opinion, these reports will provide the market with its first look at the performance of major tech names over the past three months.

From my perspective, this reflects an investor holding pattern as they digest a mix of earnings, economic data, and political developments in the United States. These factors are likely to continue driving investor activity in the markets over the coming weeks.

General Motors announced second-quarter results that missed expectations, causing the stock to drop by 12% on its worst day ever after the automaker postponed its plans for electric and autonomous vehicles. Despite these disappointments, the earnings season started strong. About 20% of S&P 500 companies have reported second-quarter results, with 80% exceeding expectations so far, explaining the gains on Monday at the start of the week.

I believe these movements follow a profitable day on Wall Street where tech stocks rebounded from last week’s heavy selling. The Russell 2000 index, focusing on small-cap companies, also performed well.

Tech stocks rose again on Monday, adding to last week’s gains, signalling that traders are moving money into these major tech names that have seen significant gains this year. The shift to small-cap companies also comes as investors grow increasingly excited about the Federal Reserve soon cutting interest rates, a move seen as particularly beneficial to smaller companies in the economic cycle.

From my perspective, stocks showed a lack of direction yesterday, with the major averages fluctuating back and forth across the flatline after Monday’s strong upward movement, starting a clear and deep corrective drop today, Wednesday.

I think traders may also be hesitant to make big investment moves or open new positions ahead of major earnings releases and economic news in the coming days. Later this week, the focus is likely to shift to personal income and spending data for June, which includes inflation readings favoured by the Federal Reserve.

I believe these data will significantly impact interest rate expectations, with the Federal Reserve widely expected to cut interest rates by a quarter point in September.

In the bond market, U.S. Treasury prices rose after trending downward in recent sessions. As a result, the yield on the benchmark 10-year Treasury note, which moves inversely to its price, fell by about 2.1 basis points to 4.239%. This indicates market instability and perhaps continued weakness in the near and medium term.

Technical Analysis of (S&P500) Prices:

On the daily chart, the market recently experienced a strong decline, dropping from a high of 5721.25 to the current level of 5494 dollars. This decline has led to the stock breaking through a strong support zone around the 5500 level.

The key level to watch for index trading is 5500 as a major support, which is a very important level. Additionally, the 5488-dollar level will be the critical support level that traders should monitor for potential buying opportunities.

The rising price channel provides a clear framework for price movement, with the lower boundary acting as support. Therefore, a drop below the 5500 level could lead to a test of the channel’s lower boundary around 5488, which is the key support level.

After testing the support level for the S&P 500 Index, if the price remains above 5500 and 5488 at the close of trading today, Wednesday, it may indicate strong buying interest and a potential continuation of the upward trend.

To determine whether this will be a decline or a breakdown of the channel and a bearish flag technical pattern, two consecutive daily closes below the channel should be monitored. This would suggest that bears may have taken control of the index’s general trend. If this occurs, one should wait for a correction to retest the lower range of the channel before entering a new short position. This retest could provide a better technical entry point for short selling.

It is also important to exercise caution and stay informed about market news and economic data releases, as these can unexpectedly affect market sentiment and price movements.

Support levels: 5506 – 5481 – 5459

Resistance levels: 5530 – 5568 – 5593