The bulls are feeling proud and loud as the stock market continued its January upswing with higher prices across the board to start the week.

Much of the positive sentiment is fueled by expectations that the Federal Reserve (Fed) will only raise the federal funds rate by .25% at its next meeting.

Any derailing of this market sentiment will come from unexpected earnings reports or negative economic news.

Bullish sentiment sends stocks higher

When bulls see an open gate, they run through it and stock market participants took advantage of bullish sentiment that sent price action higher on Monday.

In the market today, the Nasdaq topped the indexes by closing higher by 2.01% at 11,364.41 points. The S&P 500 joined the upswing with a 1.19% rise to 4,019.81 points and the Dow rounded out the positive day by reaching 33,629.56 points to gain .76% (adding 254.07 points on the day).

“Bulls have made substantial progress across many parts of the market,” said Sam Shames, Vice President of Options at Simpler Trading. “This is the most aligned the bull setup has been in over a year.”

But bulls may be facing market elements that could close the gate to higher pastures.

“This ideal reversal set is now running into the minefield of mega cap tech earnings with the theater of the debt ceiling in the background,” Sam said.

There are more than 200 companies across various industries set to report earnings this week. These include mega cap companies such as Microsoft Corp. (MSFT) and Tesla, Inc. (TSLA), as well as other high-profile companies such as Visa, Inc. (V), Texas Instruments Inc. (TXN), Boeing Co. (BA), AT&T, Inc. (T), and American Airlines Group, Inc. (AAL).

Add in more economic data reports set for release this week and the upcoming Federal Open Market Committee meeting next week, and bulls may be facing off with the bears.

“This will be an excellent test of technicals vs. near term obvious walls of worry,” Sam said. “Usually, technicals win.”

Sam noted the previously mentioned 4,180 S&P 500 (SPX) target as a point of major reflection. Technical analysis chart signals have shown squeezes in play that could send price into this range based on watching the SPDR S&P 500 ETF Trust (SPY).

Don’t take recent uptick for granted

Sam cautioned that nothing is a given, and the bears may not quickly return to any level of hibernation.

“You can’t take all these signals for granted yet as structurally SPY has not made a new swing high to invalidate the bear structure of the weekly and daily charts,” Sam said. “However, probabilistically speaking, and when considering all parts of all markets and overall positioning, this is the now-or-never spot to turn the market.”

Sam is keeping an eye on select stocks in the technology sector which may skirt higher through the volatility this week.

“Also, semiconductors are in a unique spot here if we see rotation as they play well with tech and are slightly inflationary,” Sam said. “So the sector fits in the sweet spot for many strategies if we see tech rotation.”

“This is the best chance the bulls have to run for a while,” Sam added. “The biggest enemy for bears will be other turncoat bears, so continuing to march forward this week is necessary for bulls.”

Stocks may get pushed around more this week

Looking at the stock market from a broad perspective, equities are getting pressure from various directions.

“Inflation data and the Fed’s possible response, as well as earnings reports, have been the key driver of price action within the markets,” said Mary Ellen McGonagle, Senior Managing Director of Equities at Simpler Trading. “Analyst upgrades and downgrades are also pushing stocks around.”

The across-the-board pullback in the stock market allowed several key stocks an opportunity to pull back to key areas of support, Mary Ellen noted. The Friday rally that followed put the stock market back into an uptrend.

“While this is a very positive scenario, this week will bring a slew of new earnings reports as well as Friday’s much anticipated PCE  report,” Mary Ellen said.

The U.S. personal consumption expenditures (PCE) price index which measures prices paid by consumers for goods and services. The University of Michigan (UMich) Consumer Sentiment Index is also set for release on Friday. This index gauges consumer confidence.

More sector uptrends on the horizon?

Mary Ellen sees the technology sector as a top performer in this environment, pending earnings reports, and the energy sector remains in an uptrend.

“The gain in the sector followed an uptick in the price of oil that took place despite a rise in U.S. crude inventories,” said Mary Ellen. “This is primarily because investors are anticipating that oil demand from a reopened China will keep prices of crude elevated.”

“Overall a bullish bias has been reinstated with growth stocks beginning to firm up while more value-oriented commodity stocks have mostly retained their uptrends,” said Mary Ellen.

Simpler’s traders continue to track this market as it sets up for the next big move.