Stocks prices remain near record highs, but will the uptrend continue?
Thursday’s trading session began on a positive note, with the S&P 500 index reaching a new record high of 5,878.46. It broke above Monday’s high following the TSMC (TSM) earnings release that pushed the AI sector higher, including NVDA reaching its new record. Today, the S&P 500 is likely to open 0.2% higher, extending a short-term consolidation near the new record high.
Investors are anticipating more quarterly earnings reports, with some of the big technology companies releasing their numbers next week.
Despite more advances of the stock market, investor sentiment slightly worsened, as shown by the Wednesday’s AAII Investor Sentiment Survey, which reported that 45.5% of individual investors are bullish, while 25.4% of them are bearish, up from 20.6% last week.
The S&P 500 continues trading above the 5,800 level, as we can see on the daily chart.
Nasdaq 100: More Fluctuations
The Nasdaq 100 gained just 0.08% on Thursday, after retracing its intraday advance. It remains above the 20,000 level, however, still well below the record high of 20,690.97 from July 10. Today, the Nasdaq 100 is likely to open 0.6% higher on positive sentiment following yesterday’s NFLX earnings release.
On Tuesday, I wrote that “tech stocks may experience a period of uncertainty as investors await quarterly earnings and future outlooks.” That still holds true.
VIX: Moving Lower
On September 6, the VIX index, a measure of market fear, reached a local high of 23.76. On September 26, it fell to 14.90 as stock prices were advancing toward new record highs. Recently, the VIX has been fluctuating around the 20 level, and yesterday, it moved towards 19, signalling less fear in the market.
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: Consolidation Following Record-Breaking Advance
Let’s take a look at the hourly chart of the S&P 500 futures contract. Yesterday, it slightly extended its record-breaking run, reaching a new all-time high of 5,927. The support level remains at 5,850, marked by short-term lows. This morning, it is trading along the 5,900 level as investor sentiment remains elevated.
Conclusion
The S&P 500 index is likely to open 0.2% higher this morning, poised to extend a short-term consolidation along new record highs. Yesterday, I wrote that “While there are no clear negative signals at present, the market may fluctuate after its recent rally. Today’s rally could be part of a short-term consolidation.” This proved correct, and today, the market is about to move sideways again.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 is likely to extend a consolidation along new record highs.
- Despite overbought conditions, the market continued to rise and is now trading sideways.
- In my opinion, the short-term outlook is neutral.
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Thank you.
Paul Rejczak,
Stock Trading Strategist