Upcoming Fed Meeting ‘Critical’ for S&P 500 Rally to Extend

By Senad Karaahmetovic

The Chief U.S. Equity Strategist and Chief Investment Officer for Morgan Stanley, reiterated his call that the could extend its rally to 4150.

S&P 500 is likely to get support until near-to-medium EPS estimates “come down meaningfully,” he told clients in a note. However, the bear rally is also dependent on this week’s , which is “critical” for stocks.

“Our call is still for the rally to reach 4000-4150 and we’re leaning toward the upper bound. However, we will remain unemotional in the face of poor price action and use 3700 as our trailing stop loss,” the strategist said.

The strategist also noted that the breadth is improving with over half of S&P constituents trading above the 100 DMA. He is also positive on the fact that the S&P 500 still managed to rally despite several large tech stocks reporting Q3 results “that were even worse than even we were expecting.”

“These large earnings misses did not translate into negative price performance for the S&P 500, or even the , despite these market leaders (Ex Apple) having one of their worst weeks in years. This frustrated the bears, with last week’s action perhaps the most painful with fan favorite Amazon (NASDAQ:) down almost 9% while under-owned Apple (NASDAQ:) was up by a similar amount.”

are down almost 0.5% in pre-open Monday.