While some equity strategists, like Morgan Stanley’s Michael Wilson, see this week’s Fed meeting as a catalyst for stocks to rotate lower, some also see a chance for the rally to extend beyond the critical resistance of 4100.

Oppenheimer’s Ari Wald argues that the S&P 500 has finally managed to reverse its 2022 downtrend after the index broke above the descending trend line.

“We expect strength to continue over the coming months, because 1) our cycle work is a tailwind, 2) internal breadth continues to broaden, and 3) cyclical leadership has supported the turn,” the technical analyst wrote in a note to clients.

Wald sees the S&P 500 closing the year at 4400 although he projects the index will “overshoot” to 4600 in the first half of the year.

“This marks the height of the index’s H2’22 base projected from the reversal point, and converges with Q1’22 resistance, too. While market bears have pointed to optimistic sentiment as a contrarian argument against continued gains, we don’t see such frothiness in our work,” Wald added.

JPM strategists, led by Mislav Matejka, also believe that the market will continue moving higher in the coming weeks. However, they also told their clients to fade any further rallies.

“Q1 will, in our view, likely mark a turning point, as the fundamental confirmation for the next leg higher might not come, and instead markets could encounter an air-pocket of weaker earnings and activity, as they move through Q2 and Q3,” Matejka told clients in a note.

“Beyond the still sharply decelerating money supply in the US and in Europe, inverted yield curve, no Fed pivot in sight and the continuing QT in the background, we believe that what was a very resilient corporate profits backdrop over the past two years will start to turn lower, as the pricing power reverses,” he added.

By Senad Karaahmetovic