S&P 500 Index, SPY, and VOO set to hit ATH as key catalysts near

The S&P 500 Index and top ERFs like SPY and VOO are rebounding and nearing their all-time highs ahead of talks between the US and Iran, the US inflation report, and the upcoming earnings season. VOO jumped to $625, a few points below the all-time high of $640.

US-Iran talks, US inflation report, and earnings report 

The S&P 500 Index will be in the spotlight in the next few days as major developments are set to happen. The first major one will happen on Friday when JD Vance, Steve Witkoff, and Jared Kushner meet with the Iranians to negotiate a deal to end the war. 

This meeting comes as traders remain skeptical about whether the ceasefire announced earlier this week will hold, which explains why crude oil prices have bounced back to nearly $100.

Chances are that the new talks will not lead to a concrete solution to the war. Instead, as we have seen in the past, the two sides will likely agree to talk at a later date. 

These talks come at a time when Iran believes that it has an upper hand since, according to the Financial Times, it is the Trump administration that called for them. Iran believes it has an upper hand because of its role in the Strait of Hormuz.

The other key catalyst for the S&P 500 Index will be the latest US consumer inflation report, which will come out before the market opens. Estimates are that US inflation resumed the uptrend as the prices of most things jumped during the war. Gasoline has moved to over $4 a gallon, while diesel is nearing $6.

The inflation report comes a day after the US released the weak economic report. According to the Bureau of Economic Analysis, the economy grew at just 0.5% in the fourth quarter, much lower than the previous 4.4%. This means that the US economy grew by just 2.5% last year, the slowest growth rate in years.

The VOO ETF will next react to the upcoming earnings season, which will start next week when top blue-chip companies like Citigroup, Goldman Sachs, Morgan Stanley, and ASML release their earnings reports.

Analysts believe that these companies will publish strong financial results, with the average estimate being that the earnings growth for the S&P 500 Index rose to 13.3%, the fastest growth rate in years.

These numbers come at a time when the S&P 500 Index is trading at a bargain, with the average price-to-earnings of 19, lower than the five-year average of 19.9. Some of the top companies, like Nvidia, Micron, and Microsoft are trading at their lowest multiples in years.

The ongoing S&P 500 Index performance is in line with how it trades when there is a major black swan event. It normally drops as investors panic sell and then bounces back. This is how it traded after the COVI-19 pandemic and the start of the Russia-Ukraine war.

S&P 500 Index technical analysis 

SPX Index chart  |Source: TradingView 

The daily timeframe chart shows that the S&P 500 Index has rebounded from a low of $6,304 in March to the current $6,825. It has already gapped up and moved above the 50-day Exponential Moving Average (EMA). 

The Relative Strength Index (RSI) and the Supertrend indicator has turned green. Also, the Relative Strength Index has jumped and is nearing the overbought level of 70.

Therefore, the most likely scenario is where the index and the ETFs tracking it like the SPY and VOO continue rising and hit their all-time highs this month.