Will stocks resume their downtrend?
Stocks continued their downward on Thursday, with the S&P 500 closing 0.33% lower extending the retracement of its recent rebound from March lows. This follows Wednesday's 1.1% decline, indicating continued uncertainty in the market.
This morning, the Core PCE Price Index data was released, showing a +0.4% month-over-month increase, slightly higher than the expected +0.3%. As a result, the S&P 500 is expected to open 0.4% lower today.
Investor sentiment has slightly improved, as shown in the Wednesday’s AAII Investor Sentiment Survey, which reported that 27.4% of individual investors are bullish, while 52.2% of them are bearish.
The S&P 500 pulled back below 5,700, as we can see on the daily chart.
Nasdaq 100 Breaks Below 20,000 Again
This morning, the tech index is expected to open 0.5% lower. Resistance level is now around 20,000, while potential support is at 19,500, among others. Currently, it looks like the downtrend could resume.
VIX Still Below 20
The VIX index, a measure of market volatility, rebounded on Wednesday following declines in stock prices. However, it remains below 20, showing moderate 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 Moving Sideways
This morning, the S&P 500 futures contract is still trading along its recent local highs. Resistance is now at 5,780-5,800. The market may be trading within a correction of the short-term uptrend, or resuming its downtrend. Overall, it's at the crossroads.
Conclusion
Today's higher-than-expected Core PCE Price Index release has added pressure to an already uncertain market. While stocks are set to open lower, we may see rebound attempts later in the day.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 continues retracing its Monday-Tuesday advance.
- The market still appears to be in a correction rather than a new uptrend.
- Trade tariff concerns and geopolitical tensions continue to influence sentiment.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist