S&P 500 Starts The Week On A Bullish Note As Earnings Season Begins

Summary:

The S&P 500 will be in focus this week as the earnings season for the second quarter of 2020 kicks off, amid lowered earnings expectations.

The S&P 500 index has started the week brightly, as the earnings season for the second quarter of 2020 kicks off. The focus for this season’s earnings reports will be on how the various companies have responded to the stimulus measures rolled out by the US Fed Reserve.

Helping the market to the 3210.5 price level as at the time of writing is positive coronavirus vaccine-related news. A while back, news of promising results from a coronavirus vaccine candidate from Pfizer and BioNTech hit the newswires. The pair of vaccine candidates have now been given a fast track status from the US Food and Drug Administration, boosting hopes that the world may soon have a coronavirus vaccine earlier than expected.

As far as the earnings season goes, expectations are lower than usual. Many companies had guided reduced earnings during the 1st quarter earnings season, and the markets may start to see these results as early as this earnings season, with one analyst at XM expecting S&P 500 companies to see a 44% drop in earnings.

However, the positive news from the US markets over the last two weeks that show recovery of several market-moving economic indices may be an indication that things may have improved earlier than expected. Therefore, we may see strong bullish responses to earnings that beat estimates, which could also rub off on the S&P 500 index.

Technical Outlook for S&P 500

The S&P 500 may have started the week on a bullish note, but the intraday high continues to trade around the confluence of lower highs that began to form around the 3185.0 – 3210.4 price range. In the bigger picture, these lower highs continue to indicate that the uptrend recovery in the longer-term has stalled.

Price needs to exceed the resistance at the confluence of highs at 3228.4 to establish the higher highs that will complement the higher lows of 2 April, 14/15 May and 29 June 2020, to confirm the uptrend resumption. This recovery move will then be able to aim for the 3335.5 resistance (22-24 January highs) and the 19 February high at 3393.5.