Can the S&P 500 SPX, +0.39% bounce back after breaking a four-session win streak? That’s what some are wondering as a new trading stretch begins.
Last week saw the index also reach 4,500, a level not seen since April 2022. That’s against the backdrop of an earnings season that some say may not drive up stocks as it has in the past, as we’ve already had a big rally.
Enter our call of the day from Ed Yardeni, founder and president of Yardeni Research. “The S&P 500 is hot. The Nasdaq is even hotter. The mounting concern is that both might be getting too hot, resulting in a stock market meltup that could set the stage for a meltdown,” he tells clients in a note.
Yardeni, who correctly called the S&P 500’s Oct. 12 closing low would mark a lasting bottom, believes any pullback will be a correction, not a new bear market beginning, as his firm sees just a 25% chance of recession in the next two and a half years.
He expects the bull market that began last October will last until “at least the end of next year,” bringing with it a fresh record high for the S&P 500 of between 4800 and 5400 in the next 18 months. The S&P 500 SP500.452020, +1.72%, S&P 400 SP400.45, +1.40% and S&P 600 SP600.45, +1.97% information tech indexes will led the way, he adds, noting the below chart that shows all three poised for new highs:
Yardeni/Standard & Poor’s
More correction chatter comes from Kobeissi Letter’s editor in chief and founder, Adam Kobeissi, who also says “a pullback is long overdue.” He said they shifted to bearish last week after cashing in on a bullish setup for the index.
The S&P 500 pushed above its 4511 daily top Bollinger Band on July 14, while the daily relative strength index is also signalling “severely overbought technical conditions,” said Kobeissi.
Bollinger bands are a technical tool that puts a band 2 standard deviations above and below a simple moving average. Signs of an overbought asset come with a move above that top band. The RSI indicator is often used to confirm what Bollinger bands are saying.
Last word goes to trader “Tom” from the “Lines on a Chart” substack, who says an “everyone is in the pool,” moment has arrived. He points to the CNN Fear & Greed Index, which he says on Tuesday will likely show six straight weeks of “immersion in a euphoria fueled market.”
He mixes in the NAAIM Exposure Index, which gives insight on active fund managers positioning, “noting that simultaneous presence of extreme greed and heightened exposure has historically preceded significant market declines.”
Lines on a Chart
Tom expects the S&P 500 will initially correct toward 3,950 to 4,100. “It is within this range that I find it most appealing to contemplate establishing positions and sizing long trades,” he said.
He says those above index levels correspond with key points on the volume profile, and represent spots where the highest trade has been since the 2022 peak, and should provide support for the index during any decline. Read more from Tom here.
The markets
Stocks DJIA, +0.22% SPX, +0.39% COMP, +0.93% are steady, along with Treasury yields TMUBMUSD10Y, 3.807% TMUBMUSD02Y, 4.738%. Wheat prices W00, -1.13% are climbing after Russia said it’s pulling out of the Black Sea grain deal.
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The buzz
Lockheed Martin LMT, +1.23%, Bank of New York Mellon BK, +2.33%, Bank of America BAC, +0.98% and Morgan Stanley MS, +0.75% will report on Tuesday, with Tesla TSLA, +3.20%, Netflix NFLX, +1.84% and IBM IBM, +0.61% on Wednesday and others scattered throughout the week.
Read: After years of delays, Tesla builds its first Cybertruck
Activision Blizzard shares ATVI, +3.49% rose after winning a second case against the Federal Trade Commission in court, as Microsoft MSFT, +0.14% reached a deal with Sony on Activision’s Call of Duty game.
A New York-area survey of manufacturing conditions came in stronger than expected with a gain of 1.1%. Retail sales and housing market data will also be on offer this week.
The best of the web
South Korea’s own “meme” retail traders have taken on hedge funds to drive up shares of a battery materials producer.
How Greta Gerwig turned the ‘Barbie’ movie into her dream job.
EVs may help power homes during blackouts.
The chart
Cathie Wood’s flagship ARK Innovation exchange-traded fund ARKK, +2.29% has gone through a multiyear boom/bust phase that has left it now trading below pre-2020 levels. However, this recent chart from Larry Thompson of @HostileCharts suggests fortunes may be about to change for that tech fund:
@HostileCharts
The tickers
These were the top-searched tickers on MarketWatch as of 6 a.m.:
| Ticker | Security name |
| TSLA, +3.20% | Tesla |
| MULN, +2.04% | Mullen Automotive |
| NVDA, +2.18% | Nvidia |
| NIO, +0.19% | Nio |
| NKLA, +3.56% | Nikola |
| AMC, +1.27% | AMC Entertainment |
| AAPL, +1.73% | Apple |
| GME, -0.63% | Gamestop |
| TAI, | Talmora Diamond |
| AMZN, -0.83% | Amazon.com |
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