U.S. stocks open higher but analysts warn the S&P 500 bounce may run out of steam soon

By Senad Karaahmetovic

The and are up 1% in early Tuesday trading while Index trades 0.9% higher.

Despite today’s strength, Katie Stockton, the Founder and Managing Partner of Fairlead Strategies, sees limited upside in the S&P 500 in the short term.

“We expect the bounce to run out of steam this week,” the technical analyst wrote in a note to clients.

The S&P 500 looks set to test the 4000 handle. The index closed 0.9% higher yesterday with Vital Knowledge’s Adam Crisafulli saying that the “underlying price action was even stronger than it appeared on the surface.”

“There’s a sense of calm sweeping over the tape thanks to the collective actions taken by regulators and central banks over the last 1.5 weeks,” Crisafulli said.

However, Stockton urges investors to manage risk at current levels.

“The weekly stochastics still point lower with room to oversold levels, so we would be managing risk noting next major support is ~3505.”

Stockton also expects indices to lose support from mega-caps given the near-term overbought levels.

The S&P 500 is up about 3% year-to-date (YTD).