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Asset Watch

Will the S&P 500 surpass 4,000?

 

Thursday, July 21, 2022, 13:35am GMT

Risk-on sentiment permeated across Wall Street, thanks to the S&P 500 surging by 2.76% on Jul. 19. Fed officials also talked down the prospect of a 100-basis point rate hike and recession fears fading due to resilient corporate earnings. So, could 4,000 be up next for the S&P 500?

 

Bank of America’s Chief Investment Strategist Michael Hartnett – a notorious bear – has turned bullish, telling clients that “second half 2022 fundamentals are poor, but sentiment says stocks/credit rally in coming weeks.” He also noted that “max bearish” positioning and fund managers’ “dire” economic expectations support a “contrarian Q3 trade.”

Source: TradingView

The S&P 500 closed above its 50-day moving average on Jul. 19. This milestone is important because there was only one other upswing in 2022 that saw the index supersede the key level. On the other hand, investors were quick to sell when prior bounces approached the 50-day MA. Additionally, the S&P 500’s RSI closed at its highest level since April. As a result, the bulls have the technical wind at their backs for the time being.

If momentum continues like this, it could allow the S&P 500 to challenge 4,151. The level is near the February, March and April lows, as well as the late May/early June highs.

So, is this the beginning of a persistent rally, or could the bears regain control in the coming days?

 

Sources:

Bank of America Hartnett:

https://www.bnnbloomberg.ca/bofa-survey-shows-full-investor-capitulation-amid-dire-pessimism-1.1793840

https://ca.investing.com/news/stock-market-news/bank-of-americas-top-strategist-hartnett-expects-stocks-to-rally-in-coming-weeks-432SI-2720971

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