Top S&P 500 stocks to watch

Uncertainty about the result of the UK’s referendum on continued EU membership is keeping market volatility elevated, but some of the technical aspects of the S&P 500 charts are still pointing to further gains. NetApp and the Interpublic Group of Companies are two individual stocks with upside momentum.

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Source: Bloomberg

The S&P 500 has bounced quite strongly off 2070, which largely corresponds to the mid-point of its trading over the past three months. While markets have begun to increasingly position for the 'Remain' camp to win the EU referendum vote in the UK, there is still a lot of uncertainty over how markets will ultimately react once the official result is released.

VIX continues to hover at elevated levels, while the market internals continue to show sentiment in the index has held up despite the recent pullback.

The future price-to-earnings (P/E) ratio can tell traders if the valuation of the S&P 500 is 'expensive' or 'cheap' relative to its long-run average. While this can be used to try and time reversals, it is best used in conjunction with other inputs like market internals, price action and technical analysis. The current P/E Ratio is 17.6.

The CBOE VIX Volatility Index measures the implied volatility based on the relative price of put and call options on the S&P 500. It can be a useful gauge for market sentiment. Sharp rallies in the VIX often indicate that investors are keen to buy downside protection. The current level is 18.37.

50-day moving average: 61.19%

200-day moving average: 70.54%

The whipsaws in the 50-day moving average have not had a major impact on the 200-day and sentiment in the index has not been hit too hard.

Four-week high – 18.6%

Four-week low – 2.0%

The new highs versus new lows definitely seems to be pointing to further upside for the market.

Trade of the week – AES Corp

Note: all trades are designed with a three-five day hold period in mind, and a 5% stop loss.

AES Corp has rallied strongly in the wake of its announcement that it had sold off its power distributor in Southern Brazil to CPFL Energia. Investors have clearly welcomed the exit from its Brazilian assets as the political situation in Brazil continues to be toxic. The stock closed above key resistance at $11.80 and looks like it has momentum to push higher.

NetApp

Downbeaten storage vendor NetApp has had a patchy recovery after its nasty sell-off in November and December. But recently it has managed five back-to-back sessions of gains and popped back above the Ichimoku cloud. This bodes well for its performance this week.

The Interpublic Group of Companies

The Interpublic Group of Companies has been performing very well since the end of March and has continued to trade in its latest uptrend since 12 May.

A rally of more than 2% on Monday saw it close above $23.85, and if market sentiment turns positive, fuelled by expectations the UK will reject a so-called Brexit, the stock could be set to outperform this week.

Intercontinental Exchange

ICE has now racked up eight session declines in a row and closed below its key support level of $254.50. Sentiment seems to be turning against the stock rapidly, and a move back into its previous trading range of $230-$245 is not out of the question.

CVS

CVS Health Corp has had an awful May and looks to be having an awful June too. The stock lost another 1.6% on Monday and closed below support at $93.40. There’s a good chance that this negative momentum sees the stock decline further towards its February low of $89.70.

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