FxWirePro: S&P500 bulls remain in charge heading to key resistance; sentiment suggests further rise

S&P500 is likely to rise further as bulls remain in charge despite an array of negative fundamental developments. The index SPX500 (CFD of S&P500) is currently trading at

What negatives?

• S&P500 earnings growth are expected to decline sharply, at least in H1 2019, partial thanks to trade uncertainties, rising labor, and raw material costs. In addition to that, last year’s impact of tax cuts on companies’ bottom-line will not be seen this year.
• The global economy is showing signs of cool-down. Though the U.S. remains hot to some extent.
• Export orders are in decline.
• Brexit uncertainties.

Why then move up?

• The S&P500 bulls don’t seem to mind the negatives at the moment, as the focus is on the ongoing trade negotiations between the U.S. and China. The bulls are waiting for President Trump to extend the March 1st tariff deadline, which would signal that talks are progressing in the right direction.

Warning:

• S&P500 has rallied in the last seven out of eight weeks. There is a possibility the bulls could be exhausted, which makes the ongoing rally susceptible to ‘buy the rumor, sell the news’ trade.
• Key resistance approaches near 2820 area (SPX500). 

Retail sentiment:

• Retail sentiment based on data from IG Markets, which is a UK-based company providing trading in financial derivatives such as contracts for difference and financial spread betting, strongly suggests a further rise in S&P500.
• IG markets’ retail positions data provide a glimpse to retail traders’ positions, which are largely used a contrarian indicator since retail positioning moves in opposite direction to market movements.
• As of today, according to data from IG markets, 25 percent of retail positions are bullish on SPX500, while 75percent are on the short side, suggesting further upside possibility.