After Tuesday’s muscular earnings from McDonald’s (NYSE:MCD) and Caterpillar (NYSE:CAT) apparently helped reboot Wall St’s willingness to applaud successful quarters, rising forecasts are also brightening sentiment.
Blended estimates and actual from providers like FactSet, Bloomberg and Reuters now project Q2 S&P 500 earnings growth of 9.1%, compared to around 8% early this month. That optimism lifted the S&P 500 to its latest record on Tuesday. With the slate for the remainder of the week replete with other influential names, like Ford (NYSE:F), Coca-Cola (NYSE:KO), Boeing (NYSE:BA), Facebook (NASDAQ:FB) and others—even slightly topped expectations could trigger further all-time highs by Friday.
Particular attention may now fall on the huge exporters that are also Dow Jones Industrials after the DJIA rose just shy of its own recent record peak on Tuesday. Whilst few large US companies have so far commented on the dollar’s 6% trade-weighted decline since January, the softer greenback is likely to have been a tailwind. One of the DJIA’s most in-focus technical patterns right now, a rising wedge, does offer a caution for the market’s very near-term trajectory. Price is converging to the narrow end of the wedge at the 14th July (21681.53) peak. Such a pattern would normally be a bearish signature, particularly in a downtrend. US markets have seen no such run though, so another failure to surpass 21681.53 is unlikely to trigger a severe correction—particularly as momentum studies (like RSI) are now far away from overstretched. That said bulls should still prepare for a deeper setback if DJIA breaks recent support close to 21470.
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