S&P 500 Technicals & Sentiment: What to Expect This Week

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Read More: Markets Weekly Outlook - US Data Dump, Earnings Season and Trade Deals

The S&P 500 and Nasdaq hit record highs at the open, while the Dow was close behind, as optimism from a U.S.-EU trade deal set the tone for a busy week. This week includes major earnings reports, a Federal Reserve meeting, and a looming U.S. tariff deadline. The S&P 500 rose 0.08%, and the Nasdaq gained 0.28%.

Source: LSEG

On Sunday, President Trump and European Commission President Ursula von der Leyen announced a trade deal, cutting EU import tariffs to 15%, half of what was originally planned for August 1.

Since April, the S&P 500 has climbed over 30%, and the Nasdaq has surged more than 40%. Last week, deals with trade partners like Japan, Indonesia, and the Philippines boosted Wall Street.

However, the market rally faces a big test as tech giants Meta, Microsoft, Amazon, and Apple prepare to release their earnings, which could shape Wall Street's direction.

Earnings Season Thus Far

Heading into a massive week for US earnings releases, over a third of S&P 500 companies have reported earnings, with 80% beating expectations, according to LSEG data.

Analysts now predict second-quarter earnings will grow 7.7% compared to the 5.8% estimate from July 1.

Last week, Alphabet surprised investors with increased spending on AI, sparking optimism, while Tesla warned of challenges ahead due to shrinking EV subsidies.

Tesla shares rose 0.4% today after signing a $16.5 billion chip deal with Samsung.

With 4 of the magnificent 7 reporting this week market participants are braced for significant volatility. This small group of big tech companies now make up a larger share of profits, market value, and valuations than ever before. While overall market indexes are hitting record highs, the outlook isn’t as strong if you exclude these companies.

Since the start of 2023, the S&P 500, which is heavily influenced by the "Magnificent 7" tech giants, has risen 67%. In comparison, the equal-weighted version of the index, which treats all companies equally, has only gained 32%.

Source: LSEG

This has become a hot topic of conversation for market participants.

Two years ago, the S&P 500 composite index was worth about two-thirds of the equal-weight index, with a ratio of 0.66. Now, that ratio has climbed to 0.84, the highest since 2003.

Earnings estimates for the S&P 500 over the next 12 months are 14% higher than those for the equal-weight index. Tajinder Dhillon from LSEG adds that the "Magnificent 7" tech giants made up 52% of total earnings growth last year.

However, many experts worry about the market relying so heavily on just a few companies. It works well when these companies are doing great, but if one or two stumble, the whole market could suffer. It also makes investing harder—if the market’s performance depends mostly on the "Mag 7" or Nvidia, why bother picking other stocks? This could lead to inefficiencies in the market.

Is the Dominance of the Magnificent 7 Starting to Fade?

There are early signs that the stock market is starting to expand beyond just tech and AI-focused companies, helped by positive trade news. Last week, the equal-weight index hit a new record, surpassing its November high. It also outperformed the S&P 500 for the fourth time in 13 weeks. If this trend continues, it could mark its first monthly win over the S&P 500 since March.

But can it keep up? This week, around 160 S&P 500 companies are set to report earnings, including big names like Meta and Microsoft on Wednesday, followed by Amazon and Apple. These four companies are expected to have a bigger impact on the market than all the others combined.

According to LSEG's Tajinder Dhillon, the "Magnificent 7" tech giants are expected to contribute less to overall earnings growth—dropping to 37% this year and 27% next year. The gap in earnings growth between the "Mag 7" and the rest of the market is also narrowing, with 16.4% vs. 7.7% in the second quarter, the smallest difference since 2023, and it’s expected to shrink further in the third quarter.

As chatter grows that we may be starting to see a significant shift, i think this could be misguided. The earnings potential by the Magnificent 7 stocks is unparalleled especially as monetizing AI is only starting.

This means that the current premium on these stocks, at least from my point of view, remains justified. Earnings this week from Meta, Microsoft, Amazon and Apple may provide further insights.

For now though, the topic is likely to remain an intriguing one.

Technical Analysis - S&P 500

From a technical standpoint, the S&P 500 on the daily timeframe opened higher today but has failed to push on.

The index continues to hover in overbought territory on the period-14 RSI and with little historical price action, predicting or looking for a potential reversal becomes extremely difficult.

However, just ahead of the current price we have the 6500 psychological level which could come into play.

The S&P could continue to grind ahead of the massive earnings releases due on Wednesday and Thursday respectively.

S&P 500 Daily Chart, July 28, 2025

Source: TradingView (click to enlarge)

Support

• 6300
• 6230
• 6152

Resistance

• 6500
• 6600
• 6700

Client Sentiment Data - S&P 500 Index

Looking at OANDA client sentiment data and market participants are short on the S&P 500 Index with 66% of traders net-short. I prefer to take a contrarian view toward crowd sentiment and thus the fact that so many traders are short means the S&P 500 Index could rise in the near-term.

Follow Zain on Twitter/X for Additional Market News and Insights @zvawda

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