The market’s rebound — even after Microsoft ‘s disappointing outlook — this week has reinforced a bullish technical view that stocks could continue to rise and break December’s high. “The market is trying to be glass half-full as opposed to glass half-empty. It was very easy for the market to fall apart [Wednesday], but there were dip buyers,” said Scott Redler, chief strategic officer with T3Live. To be sure, the market faces some very big hurdles in the next week, most notably from the Federal Reserve’s meeting Tuesday and Wednesday. The central bank is expected to raise rates by a quarter point Wednesday and may provide some clarity on its future hiking path. There are also major earnings that will challenge the market, including from Apple , the stock with the biggest market cap, which reports next Thursday. Amazon and Alphabet also report that day. Positive signs after Microsoft’s results Still, the technical action following Microsoft’s earnings was encouraging and could be sending positive signals about the market, at least in the near term. Tesla’s nearly 11% jump Thursday after its late Wednesday earnings beat added to sentiment. Microsoft’s earnings beat forecasts but its revenues fell short . Worrisome for investors was its warnings about future pressures on its business. The stock fell more than 4% at its lows in Wednesday’s session before turning around and closing just a half percent lower. Microsoft shares closed 3% higher Thursday. MSFT 1Y line msft “If you can’t go down on underwhelming guidance and poor earnings, I think the bears are getting a little frustrated,” said Redler. Stocks have had a choppy start to the year, but the S & P 500 is up 5.7% for January, while the tech-heavy Nasdaq is up nearly 10%. Mark Newton, global head of technical strategy at Fundstrat, said the S & P 500 was positioned for a breakout after it closed flat Wednesday and curtailed losses from the Microsoft-induced selloff. A move above 4,039 would open a path to 4,100, the December peak, and that would be bullish, he added. The S & P 500 ended Thursday at 4,060.43. .SPX 1Y line spx “If you dig in your heels and look at the economy to forecast the stock market, you’re always going to be backward-looking,” said Newton. “We usually pull out of these [bear markets] when earnings are still moving lower.” “I think from my perspective, this is exactly the opposite of 2021,” he added. “At the time, the broader market started to roll over and tech was hanging in there and provided strength that made people think markets were doing fine. When tech finally broke in January of last year, people knew that’s when the bear market was getting underway. This year has been the opposite.” A key test for the S & P 500 The S & P 500 pushed above its 200-day moving average last Friday. In a technically positive move, the index retested the 200-day during Wednesday’s slide but then closed above it. The 200-day is a momentum indicator and is literally the average of the last 200 closes in an index or security. “We’ve seen a lot of this type of action this year. It still feels like there’s another move here in the market … Now the question is how do we hang in? You have a lot of range trading, but stocks have made progress while the range has been intact,” said Redler. “Last year, you had a lot of range trading, but stocks were making lower lows. So far in January, they have been range trading, but stocks are making highs on the month. It feels as if we could see another high here.” Redler, who follows short-term technicals, said it is important for the S & P 500 to hold between 3,970 and 3,990. He also sees the next upside target at 4,100. A move to 4,100 could overshoot to about 4,150, Redler said. But Fairlead Strategies founder Katie Stockton is not as positive. She said the S & P 500 is showing signs of being overbought short term, though there continues to be short-term upside momentum. She said resistance is at the 4,020 level on the S & P 500, and she expects a pullback to follow unless it holds there for a period of two weeks. Stockton is also recommending that investors use the gap higher in Tesla as an opportunity to reduce long positions in the stock. TSLA 1Y line tsla “It’s influencing the market today. It’s giving people hope the risk-on that we’ve seen is here to stay,” said Stockton. Tesla ended Thursday’s session at $160.27. She said resistance is roughly at $165. “Gap ups after strong moves sometimes mark exhaustion,” she said. However, Redler said it will be important to see if Tesla can hold up. “Traders are watching Tesla to see how much of the earnings gap it holds. The low [on Thursday] is $154. If that holds it would be confidence the stock could build traction,” he said. “If it hangs in there and in a week it’s up to $165, that would be much better.” Fundstrat’s Newton is more positive on the overall market, and he expects stocks could be in for a two-year move forward. “They’re all paying attention to the economy and the Fed. They’re not paying attention to what’s happening in the market. We’re going from bear to bull,” he said. Beat-up sectors are leading the way Newton notes that the worst sectors last year have been leading this year. Communications services, which includes Alphabet , is up 13.7% in 2023, while tech is up about 9.4%. “Investors have to readjust their expectations of what’s going to work and what’s going to take money… It’s going to take time. We need to see stocks like Apple, Alphabet, Microsoft, we need to see these stocks going from downtrend to uptrend. We’ve seen them go from downtrend to sideways patterns. Apple is on the verge of breaking out,” Newton said. AAPL 1Y line apple Apple may be one of the next keys to the market and the tech rally — if stocks can remain positive after the Fed meeting. “Apple took back that $129 level right around Jan. 6 when the market got better. It’s been on a big range trade for two years now,” said Redler. “When it looked its best, it failed, and when it looked its worst, it bounced.” Apple ended Thursday’s trading at $143.96. Its 200-day moving average is at about $148. –CNBC’s Christopher Hayes contributed to this story .
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