Stock prices remain near record highs ahead of key earnings reports and tariff news - what's next?
Tuesday’s trading session saw little change in the broader stock market, with the S&P 500 closing 0.06% higher as investors awaited key earnings reports and tariff-related developments.
A handful of mega-cap tech stocks continue to support the bulls, but much depends on upcoming earnings, which will now take center stage. After today's close, reports from Tesla (TSLA) and Alphabet (GOOG), among others, will be released and closely watched.
This morning, the S&P 500 is poised to open 0.3% higher, reacting to overnight news of a U.S.-Japan trade agreement. While Japan’s Nikkei surged roughly 3.5%, the U.S. market appears relatively weaker.
Investor sentiment has slightly deteriorated, as reflected in last Wednesday’s AAII Investor Sentiment Survey, which reported that 39.3% of individual investors are bullish, while 39.0% are bearish.
The S&P 500 continues to hover near record highs, as the daily chart shows.
Nasdaq 100: Showing Relative Weakness
The Nasdaq 100 fell 0.50% on Tuesday, erasing Monday’s 0.5% gain but holding above the 23,000 level.
The index has recently been driven by record highs in a handful of big tech stocks like Nvidia and Microsoft, but yesterday, Nvidia closed 2.5% lower.
While no strong bearish signals have emerged yet, the recent price action may be forming a potential topping pattern.
VIX Faces More Fluctuations
The Volatility Index dropped to a local low of 16.28 last Friday, still above the prior Thursday low of 15.70. It briefly rebounded to 19.50 during last Wednesday’s intraday dip before continuing a consolidation.
Historically, a dropping VIX indicates less fear in the market, and rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market’s downward reversal. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.
S&P 500 Futures Contract: Hovering Near All-Time Highs
This morning, the S&P 500 futures contract is trading higher, rebounding from a recent low near 6,318. While no negative signals have emerged, the index remains within a potential topping formation.
Resistance is near 6,375, while support is at 6,300-6,320.
Markets remain highly sensitive to tariff-related news and could stay volatile in the near term.
Crude Oil Update: Downside Resumes?
Crude oil closed 0.97% lower on Tuesday before rebounding to the $66 level. Mixed economic signals continue to weigh on prices, while the overnight U.S.-Japan trade deal had little impact on the oil market. Today, prices are down 0.6%, retracing yesterday’s intraday rebound and moving toward the key support level at $65.
However, prices are lower again today.
For oil markets specifically, these developments are worth monitoring:
- Oil prices stabilized on Wednesday following three consecutive days of losses. The modest recovery came after the US and Japan struck a trade deal including a 15% tariff on US imports from Japan, which improved global trade sentiment.
- US crude and gasoline inventories declined last week while distillate stocks rose by 3.48 million barrels, offering some relief to the tight middle distillate market. Additionally, the US is considering sanctioning Russian oil to end the Ukraine war, while the EU approved its 18th sanctions package lowering the Russian crude price cap.
- Market challenges persist as the EU considers countermeasures against US tariffs, while hopes fade for a deal before the August 1 deadline. China and the EU held "candid and in-depth" trade discussions, but uncertainty around these negotiations continues to weigh on oil market sentiment.
Oil Hovers Near Recent Lows
Last week, crude oil rebounded from $65-66 support, briefly moving above a month-long trend line and reaching just over $67. Since then, prices have resumed their decline.
My short-term outlook on oil remains neutral.
Conclusion
Stocks are expected to open higher today, supported by improved sentiment following overnight news about the U.S.-Japan trade deal.
The key question remains: are these fluctuations a topping pattern or simply an uptrend similar to "climbing a wall of worry"? However, a lack of strong bullish catalysts may limit further upside in the near term.
With releases from TSLA and GOOG due after the close, investor focus now shifts squarely to corporate earnings.
Here’s the breakdown:
- The S&P 500 remains near record highs around 6,300.
- The recent rally extended gains for those who bought based on my Volatility Breakout System.
- There are no clear bearish signals yet, but a deeper downward correction is not out of the question at some point.
The full version of today’s analysis - today’s Stock Trading Alert - includes the additional stock trading ideas and the current S&P 500 position. I encourage you to subscribe and read the details today (with a single-time 7-day free trial). Stock Trading Alerts are also a part of our Diamond Package that includes Gold Trading Alerts and Oil Trading Alerts.
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Thank you.
Paul Rejczak
Stock Trading Strategist
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