Why the S&P 500, SPY, and VOO ETFs are ripe for a breakout

The S&P 500 Index and its ETFs, like SPY and VOO, have remained in a narrow range in the past few months as traders focus on geopolitics, artificial intelligence (AI), and the ongoing woes in the private credit industry.

The index was trading at $6,880, down slightly from the year-to-date high of $7,050.

S&P 500 Index has formed an ascending triangle pattern 

The first main reason why the S&P 500 Index may rebound soon is its technicals, which have been highly supportive in the past few weeks.

This chart shows that it has formed an ascending triangle pattern, which is a common bullish continuation sign.

This pattern is made up of a horizontal line and an ascending trendline.

The upper side of the thigh triangle is at $7,000, while the trendline connects the lowest swings since November last year. 

Therefore, there is a possibility that it will have a strong bullish breakout in the coming weeks, with the initial target being at $7,000.

A move above that level will point to more gains, potentially to the key resistance level at $7,500.

On the other hand, a drop below the ascending trendline will invalidate the bullish outlook and point to more downside, potentially to the psychological level at $6,800.

US, Israel, and Iran potential ceasefire 

One major reason why the S&P 500 Index has moved sideways in the past few months is the rising possibility that the United States and Israel would attack Iran.

Odds of the attack were up to 80% on popular prediction markets like Polymarket and Kalshi.

The war in Iran started this weekend and both sides have issued major warnings, with President Donald Trump warning of more sustained attacks on Iran.

Iran, on the other hand, has threatened to fight to the end.

On the positive side, most analysts believe that the war will ultimately end in the coming days or weeks.

Data on Polymarket shows that the odds of a ceasefire happening before the end of the month have continued rising.

Therefore, the S&P 500 Index and its ETFs like VOO and SPY will likely rebound in the coming weeks as traders anticipate a ceasefire or the beginning of talks between all sides.

Strong earnings growth 

The S&P 500 Index will also do well because of the recent corporate earnings, which have demonstrated that growth remains resilient.

Data compiled by FactSet shows that 96% of all companies in the S&P 500 Index have already published their results.

Of all these companies, the earnings growth was 14.2%, the fifth consecutive quarter of double-digit growth. 

Some of the biggest companies in the index published strong financial results.

For example, Nvidia released robust earnings, with its revenue soaring to over $68 billion.

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Wall Street analysts now believe that its annual revenue will be over $366 billion this year, followed by $458 billion in 2027.

Other top companies like Microsoft, Google, Meta Platforms, and banks like Goldman Sachs and Morgan Stanley also released strong financial results.

Federal Reserve interest rate cuts

The Federal Reserve will also help to recharge the S&P 500 Index this year.

Trump has already nominated Kevin Warsh to become the next Fed Chair, replacing Jerome Powell, who has maintained a moderately hawkish tone.

Analysts anticipate that the bank will deliver three rate cuts this year, a move that will bring the headline rate to below 3%.

The stock market tends to do well when the Fed is cutting rates, as it leads to rotation from the bond market to equities.