Institutional investors continue to buy the dips, while retail traders sell the S&P 500 into rallies. Their tug-of-war is keeping the broad equity index in consolidation. Let’s discuss this and outline a trading plan.
The article covers the following subjects:
Major Takeaways
- Major banks remain bullish on the S&P 500.
- Investors are selling Big Tech stocks.
- The US market is struggling to compete.
- Selling the S&P 500 below 6,800 remains relevant.
Weekly Fundamental Forecast for S&P 500
“Be greedy while others are fearful!” BNP Paribas uses this message to encourage S&P 500 bulls. The bank believes a mega-cap tech rally could unfold over the coming weeks. Citigroup thinks that a US-Iran nuclear agreement would remove the geopolitical risk premium and push the broad index higher. Major banks recommend buying the dips. Retail investors, by contrast, are hedging against downside risks. As a result of this standoff, the US equity market in 2026 is trading within its narrowest range since the 1960s.
S&P 500 Trading Range Dynamics
Source: Bloomberg.
Market strategists have solid arguments. According to FactSet, average earnings among the 94% of S&P 500 companies that reported fourth-quarter results rose 15%, while revenue rose 9.5%. Although US economic growth slowed to 1.4% in October–December, the slowdown was largely attributed to the government shutdown. The Atlanta Fed’s leading indicator signals that GDP growth may accelerate to 3.1% in January–March. The Federal Reserve is expected to resume monetary easing in June and continue into 2027. Aren’t these ideal conditions for an S&P 500 rally?
That may be true, but investors remember the principle: buy the rumor, sell the fact. From 2023 to 2025, they bought virtually any stock linked to artificial intelligence. In 2026, doubts emerged about AI’s ability to push the S&P 500 much higher. A telling example was NVIDIA’s stock dropping more than 5% despite strong corporate earnings. Expectations for profit and revenue were so high that even impressive results failed to impress.
Elevated valuations, doubts about whether massive AI investments will pay off, and even jokes about the AI boom are fueling sharp swings in the S&P 500. Is artificial intelligence a bullish force for the economy and markets? Or a bearish one? Or could it be so bullish that it eventually turns bearish?
S&P 500 Price-to-Earnings Ratio Dynamics
Source: Bloomberg.
Capital is flowing out of Big Tech. Early in the year, investors rotated into small-cap stocks tied more closely to the US economy. Once warning signs began to emerge from economic data, that rotation paused.
Investors have plenty of alternatives. According to the MLIV Pulse survey, Asian equity markets could be the main beneficiaries of Donald Trump’s 10–15% tariffs. If you are still interested in AI-driven trading, consider South Korea’s KOSPI index, which has surged 57% since the start of the year. Compared to that, the S&P 500 looks modest.
Weekly Trading Plan for S&P 500
In my view, major banks are sticking to traditional trend-based recommendations, while retail investors remain too cautious to buy dips that could deepen further. An S&P 500 drop below 6,800 will be a signal to sell. Conversely, a breakout above 7,000 could restore bullish confidence and support new long positions.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of SPX in real time mode
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