Stocks are approaching record highs - will the S&P 500 extend its bull market?
Stocks gained on Thursday, with the S&P 500 index closing 1.04% higher after breaking back above the 6,100 level in response to potential peace talks in the Russia-Ukraine conflict. The index approached its January 24 record high of 6,128.18 yesterday, reaching an intraday high of 6,116.91.
Will the market push toward new record highs? Today, the S&P 500 is expected to open 0.1% lower following weaker-than-expected retail sales data. A profit-taking may happen at some point.
Investor sentiment worsened again, as shown by the Wednesday’s AAII Investor Sentiment Survey, which reported that 28.4% of individual investors are bullish, while 47.3% of them are bearish.
The S&P 500 index approached its late-January record high, as we can see on the daily chart.
Nasdaq 100 Back Above 22,000
The Nasdaq 100 gained 1.43% on Thursday, recovering most of its pullback from the December 16 record high of 22,133.22. This level now marks a potential resistance, while support is currently around 21,800. Today, the Nasdaq 100 is expected to open 0.1% lower, likely consolidating after Thursday’s advance.
VIX Drops to 15
The VIX index, a measure of market volatility, rebounded from 15 last Friday, reaching 16.66. It continues to fluctuate with local highs above 20 on January 27 and February 3, still indicating a lack of fear in the market. Yesterday, it dipped as low as 14.98.
Historically, a dropping VIX indicates less fear in the market, and rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market’s downward reversal. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.
S&P 500 Futures Contract Fluctuates After Rally
This morning, the S&P 500 futures contract is trading sideways after Thursday’s rally. Resistance is near 6,150, marked by recent highs, while support is now at 6,100, the former resistance level.
Conclusion
Stocks are set to open virtually flat on Friday, with the S&P 500 likely consolidating after Thursday’s gains. Hopes for a potential resolution to the Russia-Ukraine conflict fueled the rally, but today, profit-taking may occur. Investors may also be hesitant ahead of the long holiday weekend.
On Monday, in my Stock Price Forecast for January 2025, I noted “...recent rallies have provided selling opportunities. What will February bring? The earnings season is in full swing, likely adding to volatility. Political developments are increasing uncertainty. The market's ongoing consolidation since November may be forming a medium-term topping pattern ahead of some more meaningful downward correction. However, no confirmed bearish signals have appeared yet.”
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 approached its late-January record high on geopolitical news.
- The stock market is still seeing increased volatility following the post-election rally.
- In my opinion, the short-term outlook is neutral.
The full version of today’s analysis - today’s Stock Trading Alert - is bigger than what you read above, and it includes the additional analysis of the Apple (AAPL) stock and the current S&P 500 futures contract position. I encourage you to subscribe and read the details today (with a single-time 16-day free trial). Stocks Trading Alerts are also a part of our Diamond Package that includes Gold Trading Alerts and Oil Trading Alerts.
And if you’re not yet on our free mailing list, I strongly encourage you to join it - you’ll stay up-to-date with our free analyses that will still put you ahead of 99% of investors that don’t have access to this information. Join our free stock newsletter today.
Thank you.
Paul Rejczak,
Stock Trading Strategist