The S&P 500 has broken above its trading range. Will stocks resume their record-breaking rally?
Stocks rebounded on Thursday, breaking above the recent trading range as investors reacted to NVDA’s earnings release and economic data. The S&P 500 index closed 0.53% higher after a volatile trading session. However, this morning, it is expected to open 0.1% lower, signaling potential consolidation below its prior trading range.
Investor sentiment has weakened this week, as shown in Wednesday’s AAII Investor Sentiment Survey, which reported that 41.3% of individual investors are bullish, while 33.2% of them are bearish.
The S&P 500 continued to retrace more of its recent sell-off, as we can see on the daily chart.
Nasdaq 100 Gains Despite Mixed Tech Stocks Performance
The Nasdaq 100 index recently fluctuated within a consolidation range but managed to break higher yesterday despite mixed performance among major tech stocks. Resistance remains at 5,950, marked by last Friday’s gap down. Today, the index is likely to open 0.1% lower, indicating continued uncertainty.
VIX: Continued Fluctuations
The VIX index, a measure of market volatility, reached 18.79 on Wednesday, approaching the psychologically significant 20 level, signaling rising investor caution. On Thursday, the VIX remained within a consolidation.
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 Approaching 6,000 Again
The S&P 500 futures contract is trading just below the resistance of 5,980-6,000. On Thursday, it retraced more of its recent pullback, extending its consolidation following the post-election rally. The support remains at 5,880-5,900.
Conclusion
Friday’s trading session is set to open virtually flat for the S&P 500 index. Stocks may fluctuate following Thursday’s gains, as investors await key economic data: PMI release at 9:45 a.m.
In summary, stocks show mild bullishness, and the market appears to be getting closer to record highs again. However, this could be part of a rebound following recent declines.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 is likely to trade sideways as investors anticipate PMI data.
- The market is experiencing increased volatility.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist