Will caution pay off as stock prices near record highs?
Tuesday’s stock market session saw little change, with the S&P 500 closing 0.05% higher, extending its recent trading range and staying near Monday’s record high of 6,052.58. Today, the S&P 500 is set to open 0.3% higher and may reach another all-time high.
Investor sentiment weakened last week, as shown by Wednesday’s AAII Investor Sentiment Survey, which reported that 37.1% of individual investors are bullish, while 38.6% of them are bearish - an increase from 33.2% the previous week.
The S&P 500 remains near its all-time high, as we can see on the daily chart.
Nasdaq 100: Another New Record
The Nasdaq 100 gained 0.31% yesterday, surpassing the 21,200 level to hit a record high of 21,235.79. Today, it is expected to open 0.6% higher, driven by Salesforce (CRM) earnings reported yesterday. Support is now at 21,000, marked by previous resistance.
VIX: Closer to 13
The VIX index, a measure of market volatility, reached a new local low of 13.19 yesterday - the lowest level since mid-July, prior to the August stock market correction. This could signal an impending downward reversal and a potential correction in stock prices.
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: New Record Highs
The S&P 500 futures contract is hitting new record highs this morning. While no immediate bearish signals are present, a potential correction remains possible. Support is at 6,030–6,050, marked by recent fluctuations.
Conclusion
Stock prices are set to open higher today, following Salesforce (CRM) earnings. While overbought conditions could lead to a near-term correction, no clear negative signals are evident.
On Monday, in my Stock Price Forecast for December 2024, I wrote “the stock market experienced a strong rally in November, driven by the presidential election outcome. While December is historically a bullish month, increased volatility and a short-term correction remain likely”
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 continues its uptrend, reaching record highs.
- The market is still seeing increased volatility following the post-election rally.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist