Does the S&P 500 Index Have What It Takes to Hit New Record Highs Today?

Summary:

The S&P 500 index has touched off new highs, but continues to lack upside momentum as investors await more positive news from the domestic front.

The S&P 500 index is set for a higher but muted open, as it has rallied to test its 2020 highs and is now threatening to stage new highs. Even though the index is at major resistance, analysts at Credit Suisse continue to believe that the index could post new highs well beyond the 3400 mark, despite the weak momentum that the S&P 500 has shown over the last two days.

The momentum for the S&P 500 has been quite low in recent times, as markets await some positive feelers from the negotiations between the Democrats and Republicans over the enhanced stimulus packages. Markets are also hoping that some form of de-escalation of recent tensions between the US and China can occur. But pending these outcomes, the S&P 500 continues to draw strength from recent earnings results.

Home improvement company Lowe’s Companies Inc, as well as Target Corporation, posted stellar earnings. Target saw its adjusted earnings for the second quarter of 2020 come in at $3.38, versus earnings of $1.82 posted for the same period in 2019. Lowe on its part posted revenues of $2.8billion with earnings per share of $3.74, which trumped estimates and surpassed last year’s earnings for the same period ($1.7billion; $2.14).

Outlook for S&P 500

Today, the index opened with a new high of 3395.7 but has so far been unable to gain enough bullish momentum to drive further advance. The index, therefore, finds itself begging for more momentum to produce a breakout towards new highs. Until then, the current all-time high of 3395.7 remains the price to beat for bulls. A clear break with a 3% penetrating close allows the index to soar to a new record. This move would also invalidate the wedge once and for all.

If momentum fades and sellers hit the streets, we could see a pullback from current levels, which could aim for the 3335.5 support. More importantly, 3228.4 constitutes the second level of support, with 3137.0 and 3070.8 forming new targets to the downside if 3228.4 gives way.