S&P 500 momentum report

Major US banks will be releasing their earnings results this week, in which previous Q1 earnings season saw 93% of the financial sector delivering an earnings beat. With markets hitting record highs and economic growth forecasts raised, investors may be having high expectations of earnings outperformance going into the earnings season.

The S&P 500 continues to push higher last week, with its ascending channel pattern largely intact. That said, on the weekly chart, recent higher highs formed by the S&P 500 were met with a lower low on the MACD indicator, with the RSI briefly touching overbought territory. The upper trendline of the channel may potentially serve as resistance at 4,450. Support may be at 4,240, where a previous resistance level may now turn into support.

^{Source: IG charts}

Sector performance

Over the past week, the real estate sector came in as the top-performing sector as bond yields remain low below the 1.40% level, potentially pointing towards low funding costs. The energy sector became the worst performing sector, giving back its gains after coming in as the top-performing sector the week before. This comes amid oil prices retracing from its two-year high on global economic growth concerns. The financial sector has also underperformed the overall market for the past week, with one to watch if the upcoming US banks’ earnings release this week may provide a lift for the sector.

SPX sector returns: one-week and one-month

^{Source: Refinitiv}

SPX sector returns: one-month and year-to-date

^{Source: Refinitiv}

Sector ETFs summary

^{Source: Refinitiv}

^{*Note: The data is from 6 – 12 July 2021}

Top 15 winners and losers

^{Source: Refinitiv}

^{*Note: The data is from 6 – 12 July 2021}

Top stocks by sectors

^{Source: Refinitiv}

^{*Note: The data is from 6 – 12 July 2021}

US Fang stocks

^{Source: IG charts}

Momentum stock studies

Note: We have selected various inputs to screen for stocks with the strongest positive momentum. The logic behind the screener is that if any stock passes all these momentum screens, there is a higher probability that they will continue on the current trajectory in the short-term. The idea of buying high and selling higher is key here.

Screening for the strongest stocks in the S&P 500 will require a stock price to: 1) be above the 20-day moving average; 2) be above the 50-day moving average; 3) be above the 100-day moving average; 4) price has closed above the upper Bollinger band.

Starbucks (SBUX) testing its all-time high

Starbucks may be seen as a reopening play, as improving vaccination rate and further economic reopening may drive same-store sales, as seen in its fiscal Q2 results. This comes with its digital shift into the new normal, such as Starbucks pickup stores and increased mobile app transactions, which may provide tailwind for its growth moving forward. Bloomberg estimates indicate 20 ‘buy’ ratings, 14 ‘hold’ and one ‘sell’, with consensus target price of US$123.08 suggesting 3.9% upside at the time of writing.

Starbucks is currently re-testing its all-time high at the US$118.45 level. The longer-term uptrend remains intact with a recent bounce off its 100-day MA. Near-term momentum seems to be tilted towards the upside, as the MACD indicator crossed above the zero mark after a period of consolidation. Support may be at US$113.63, in line with its 50-day MA. Resistance may be at US$120.95, which is the Fibonacci 161.8% extension level from its Covid-19 dip in 2020.

^{Source: IG charts}

Prepared by

Yeap Jun Rong

Market Strategist, Singapore

Twitter: Yeap_IG

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