Joby Aviation closes $591 million stock offering with full underwriter option
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Investors stay optimistic as limited data releases and Fed cut hopes fuel momentum.
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Dip buyers dominate, keeping equities near record highs ahead of earnings season.
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Overbought signals emerge, but traders stick with the trend until fundamentals shift.
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With no major economic news on the horizon due to the government shutdown and bearish catalysts minimal, markets continue to grind higher. S&P 500 index futures hit new highs overnight before easing slightly. Can we see the rally extend further ahead of the earnings season?
Until now, investors have largely ignored worries of a potential bubble in tech names, hoping that the companies will be able to meet or exceed high expectations. There’s also been some focus on the restart of the Fed’s interest-rate cuts, with hopes of two more cuts in 2025 helping to offset worries about the labour market cooling.
Markets Grind Higher and Higher
Judging by how markets have been grinding higher, it looks like investors seem confident that the ongoing rally can simply keep going without any real bearish catalyst to turn the tide. And with the US government shutdown limiting economic data releases, there’s no reason for the Fed not to cut rates a further two times.
Consequently, there’s not much reason for traders to start selling equities aggressively right now. Sure, some profit-taking is happening here and there ahead of earnings season – but overall, it looks like most investors are still happy to hold onto their positions.
Meanwhile, active traders are betting the rally will continue and are buying every dip they can find. You can see this clearly in the tiny pullbacks and the string of fresh record highs across the major indices. In this kind of environment, looking for bearish trades doesn’t really make much sense.
Company Earnings Coming Up
Traders will certainly look for direction from the upcoming reporting season for validation of the AI rush that has helped to power a record rally on Wall Street. But tech earnings are later this month. Up first, we got results from a few large companies today, including PepsiCo (NASDAQ:PEP) and Delta Air Lines (NYSE:DAL).
The focus will now turn to the big banks next week, including Goldman Sachs (NYSE:GS) and Citigroup (NYSE:C), while later in the month it will be earnings from the tech giants that will likely have the most impact on the S&P 500.
S&P 500 Technical Analysis and Trade Ideas
Right now, with equity indices sitting at record highs, dip buying remains the strategy of choice. Key support levels continue to hold up. One in particular is 6756, which used to be a resistance level back in September. That level has now flipped into support.
It’s been tested several times over the last few days, and yesterday we finally saw a solid rally away from it, pushing the index to a new record high. Futures have since paused around the 6800 mark. But that looks more like a short breather before the next push higher.
The next big level to watch is 7000 on the S&P 500 futures chart. It’s not just a psychological barrier, but also aligns with the 161.8% Fibonacci extension level from the last major downswing in February, which comes in around 6991.
Meanwhile, momentum indicators are flashing overbought signals across multiple timeframes – not only for the S&P 500 but also in other markets like gold, where the monthly RSI has climbed to an extreme 90. For the S&P, the daily RSI is sitting above 70, the weekly RSI has also crossed that threshold, and even the monthly RSI is around 75. The last time we saw these levels was late 2024 or early 2025, right before the market paused and then corrected a few months later.
At some point, RSI readings like this need to cool off – either through time, meaning sideways consolidation, or through price action, meaning a pullback. But with the S&P rising steadily for six months now, momentum remains strong. High RSI doesn’t necessarily mean a sell-off is coming right away. It just tells us that things are stretched.
And while some argue RSI doesn’t matter in strong trends, it’s still a good reminder that markets can’t move up in a straight line forever.
Trend Is Your Friend…
For now, though, until something fundamentally changes – like disappointing earnings, fresh geopolitical tensions, or another trade shock – traders are likely to keep holding their long positions. After all, they’ve been ignoring bearish macro headlines ever since markets bottomed in April.
So, the bottom line is, don’t fight the trend just yet. If you’re not already long, it might be better to stay patient, wait for a pullback, and then look to potentially buy the dip.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.