Chart analysts say Microsoft and Tesla's stock moves suggest positive signs for the market

Even after Microsoft's disappointing outlook, the market rebounded this week - which reinforced a bullish technical view that stocks may continue to rise and break December's highs.

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The market is trying to see the glass as half full rather than half empty, said Scott Redler, chief strategic officer at T3Live. "It was very easy for the market to fall apart on Wednesday, but there were dip buyers."

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There is no doubt in my mind that the market will face some major hurdles in the coming week, especially after the Federal Reserve's meeting on Tuesday and Wednesday. On Wednesday, the central bank is expected to raise rates by a quarter point, clarifying its future hike path. There will also be major earnings reports next week, including Apple, the company with the biggest market cap, which reports next Thursday. Amazon and Alphabet also report on this day.

Microsoft's results show positive signs

It is still important to note that the technical action following Microsoft's earnings was encouraging and could be sending positive signals about the market at least in the short term, at least in the short term. Tesla’s nearly 11% jump Thursday after its late Wednesday earnings beat added to sentiment.

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Microsoft's earnings beat analyst expectations, but its revenue fell short of expectations. Worryingly, for investors, was the company's warning about future pressures on its business. A 4% drop at the stock's lows on Wednesday was followed by a half percent drop at the close. Thursday's closing price for Microsoft shares was 3% higher.

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In Redler's opinion, it seems that the bears are getting a little frustrated by the fact that they can't take down the market on underwhelming guidance and poor earnings. While stocks have had a choppy start to the year, the S&P 500 is up 5.7% for the month of January, while the Nasdaq, which is heavily weighted towards technology, is up nearly 10%.

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Fundstrat's global head of technical strategy, Mark Newton, said the S&P 500 was poised for a breakout after closing flat on Wednesday. Adding that a move above 4,039 would open a path to 4,100, the December peak, would be bullish.

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Thursday's closing price for the S&P 500 was 4,060.43.

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You're always going to be backward-looking if you dig in your heels and forecast the stock market based on the economy," said Newton. When earnings are still declining, we usually pull out of these bear markets."

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According to him, this is exactly the opposite of 2021. The broader market started to roll over at the time, and tech hung in there and provided strength, making people believe markets were doing well. People knew the bear market was beginning when tech broke in January of last year. It has been the opposite this year."

S&P 500 key test

A push above the 200-day moving average was reported by the S&P 500 last Friday. During Wednesday's slide, the index retested the 200-day moving average but then closed above it after a technical move that was technically positive. In the financial world, the 200-day is referred to as a momentum indicator and is the average of the last 200 closes in an index or security.

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There has been a lot of action of this kind this year. The market still feels like it's in the middle of another move right now ... Now the question is, what should we do to hold on to these gains? In spite of the fact that stocks have made progress while the range has remained intact, there appears to be a lot of range trading happening," said Redler. There was a lot of range trading last year, but stocks were making lower lows than they were making highs. There has been a lot of range trading in January, but the stocks are making highs as the month goes on. We feel as if we are on the verge of seeing another high at this point."

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In Redler's short-term technical analysis, the S&P 500 should hold between 3,970 and 3,990. Additionally, he sees 4,100 as the next upside target. Redler believes that the price could overshoot 4,150 as it moves toward 4,100.

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Fairlead Strategies founder Katie Stockton, however, is less optimistic. Despite some upside momentum in the short term, the S&P 500 appears overbought short term.

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According to her, if the S&P 500 fails to hold at 4,020 for a period of two weeks, a pullback will follow. Stockton also advises investors to use Tesla's gap higher as a chance to reduce long positions in the stock.

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Currently, it is influencing the market in a positive way. There is a feeling that the risk-on that we've sAdditionally, Stockton recommends reducing long positions in Tesla during the gap higher in the stock's price the key resistance level is around $165. Oftentimes, when there is a gap up after a strong move, there is exhaustion behind it, she said.

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Nevertheless, Redler said it will be important to see if Tesla can hold up against the competition. There aAdditionally, Stockton recommends reducing long positions in Tesla during the gap higher in the stock's pricell be confident if that happens, and we will be able to see traction in the stock," he said. If it's up to $165 in a week, that would be a great result. If it hangs in there, that would be a great result."

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Fundstrat's Newton is more optimistic about the market, and he anticipates a two-year rally.

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All of them are paying attention to the economy and the Fed. There is no attention being paid to what's hapDuring the gap period in Tesla's stock, Stockton advises investors to reduce long positions in the stock

Sector boom in beat-ups

In Newton's note, he points out that this year's weakest sectors are leading. By 2023, communications services, including Alphabet, are expected to grow by 13.7%, while technology will grow by 9.4%.

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Investors need to reassess what's going to work and what's going to cost them... It will take some time. Apple, Alphabet, and Microsoft need to move from downtrends to uptrends. It has happened that they have moved from downtrends to sideways patterns at times. According to Newton, Apple is about to break out."

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The next key to the market and tech rally will be Apple - if stocks stay positive after the Fed meeting.

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After the market started improving around Jan. 6, Apple was able to regain that $129 level. As the old saying goes, "When everything looked good, it failed, and when everything looked bad, it rebounded," said Redler.

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Apple closed at $143.96 on Thursday. Apple's 200-day moving average is $148.

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