Enough momentum to push S&P 500 to new highs

The S&P 500 climbed by 0.51% on Wednesday after strong earnings were reported from a number of key US corporations. The Dow Jones Industrial Average and Nasdaq also rose with the Nasdaq climbing past the 5000 mark.

Gains on Wall Street continued a strong session in Europe where the European Central Bank confirmed it would be continuing its ultra-loose monetary policy. Not only did this boost stocks in Europe but it also sent crude oil prices higher and they continued higher after a US report showed crude inventories were slowing.

Good news from the banks

Boosting investor sentiment on Wednesday came positive news from the banking sector with JP Morgan and Wells Fargo both delivering top-end results. Meanwhile, Intel Corporation climbed 4.26% after declaring earnings that were largely in line with expectations. Shares in Netflix spiked higher in after hours as it was announced that the company had acquired a record number of international subscriptions.

Overall, analysts are predicting Q1 profits from major US companies to fall by 2.6%, with most downgrades occurring in commodity and currency-linked industries. However, the low bar means that equities now have the opportunity to beat expectations, something that could set the S&P 500 on course for another record.

Technicals & Outlook

The S&P 500 opened higher on Wednesday and stayed above it’s key pivot level for the whole day in a predominantly bullish session for traders. The index saw some profit taking at the second resistance level and finished the day just below 2,107.

Looking ahead, we are bullish over the next few days and see potential for a move up to 2,125. Technical indicators are mostly bullish and the Elliott wave is wave c (circle) up within an ending diagonal. The DMI’s +DI line has crossed above the -DI line (bullish). On the longer term horizon and see potential for a move down to 2,070 over the next few weeks, though the risk of a trend reversal is high.

Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk

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