Trade of the day: US500

Facts

• On August 7 , the US500 is trading near 7,745 points , while the 14-period RSI stands at 62.5 .
• Analysts recently raised their Q3 2026 EPS forecast for the S&P 500 by 0.3% in July, to $88.95 .
• Historically, according to FactSet , analysts have typically revised EPS estimates lower by 1.0% to 1.9% during the first month of a quarter.
• This marks the second consecutive quarter and the fourth out of the past five quarters in which EPS estimates have increased at the beginning of the quarter.
• Analysts also raised the full-year 2026 EPS forecast for the S&P 500 by 3.2% , from $340.49 to $351.33 .

Recommendation

Long US500 at market price

• Stop Loss: 7,540
• Take Profit: 8,000

Opinion

Rising earnings expectations remain one of the strongest fundamental arguments supporting further upside potential for Wall Street. Equity valuations are much easier to sustain when expectations for future corporate earnings improve, as higher stock prices are justified by stronger earnings rather than solely by an expansion in valuation multiples (such as the P/E ratio). Particularly encouraging is the fact that upward revisions have also been concentrated in the Financials and Energy sectors, suggesting that improving fundamentals extend beyond the largest technology companies and reflect broader economic strength.

According to FactSet, the largest upward earnings revisions in recent weeks have been recorded in the Energy (+2.6%) and Financials (+1.7%) sectors, reinforcing the view that the improvement in earnings expectations is becoming increasingly broad-based. Higher earnings forecasts also signal growing optimism regarding the profitability of US companies, while the S&P 500’s forward P/E ratio of 19.6 remains broadly in line with its five-year average of 19.9 and only slightly above its ten-year average of 19.0 .

This suggests that the market’s valuation has not expanded excessively despite the strong rally. Meanwhile, the second quarter of 2026 has delivered the strongest earnings growth since the fourth quarter of 2021, when year-over-year comparisons were still heavily influenced by the post-pandemic recovery. The annual earnings growth rate for the S&P 500 has improved from 23% expected in June to around 47% today , driven largely by exceptionally strong results from Alphabet and Amazon . Importantly, even excluding these two companies, earnings growth would still stand at approximately 26% , comfortably above earlier expectations. From a technical perspective, the US500 is trading near the upper boundary of its ascending price channel.

However, with the RSI remaining at a relatively moderate 62.5 , bullish momentum does not yet appear overstretched and could continue, particularly if oil prices retreat below $80 per barrel once again. Looking ahead, the US administration may face increasing political pressure to reduce tensions with Iran before the end of the summer, as media attention is expected to shift toward the upcoming US midterm elections. Persistently high gasoline prices could become a significant political headwind for Republicans, providing an additional incentive to pursue de-escalation in the Middle East. Taking both the fundamental and technical backdrop into account, we recommend initiating a long position in the US500 , with a stop loss at 7,540 , defined by recent price reactions, and a take profit at the psychologically significant 8,000-point level .

Source: xStation5

Methodology and assumptions

This recommendation is based on a combination of technical and fundamental analysis of the US500 index, incorporating the current earnings season and FactSet earnings data. Trend assessment was conducted using classical technical analysis , including price action , support and resistance analysis , and moving averages .

Register a Revolut Business Account