Will stock prices break their three-day winning streak?
The S&P 500 closed 2.03% higher on Thursday, reaching its highest level since April 3. This puts the index on a three-day winning streak and on track for a positive week, with gains approaching 4%. However, futures indicate a 0.2% lower open today as the market digests Alphabet's earnings and ongoing trade developments.
The key 5,500 resistance level continues to act as a ceiling for price action. This level is marked by both the April 3 gap down and previous lows. The market's inability to break decisively above this resistance suggests that more fluctuations are likely.
Investor sentiment has worsened, as shown in the Wednesday’s AAII Investor Sentiment Survey, which reported that only 21.9% of individual investors are bullish, while 55.6% are bearish.
The S&P 500 extended its short-term advances on Thursday, as we can see on the daily chart.
Nasdaq 100: Above 19,000
The Nasdaq 100 closed 2.79% higher on Thursday, extending its recent advances and breaking back above the 19,000 level.
Alphabet (GOOGL) shares rallied strongly in premarket trading after reporting much stronger than expected earnings for the first quarter and announcing a substantial $70 billion buyback program.
However, the Nasdaq 100 is expected to open 0.2% lower this morning. Resistance is around 19,200, and the next one is at 19,500, among others. On the other hand, support is now around 18,700-18,800.
VIX Pulling Back
The VIX retreated further yesterday, reaching as low as 26.36. The "fear index" continues its downtrend from the elevated levels seen earlier this month.
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: Trading Along 5,500
This morning, the S&P 500 futures contract is trading along the 5,500 level, after pulling back from a local high of 5,553. It marks a short-term resistance around 5,550. Support, on the other hand, is at 5,400, marked by recent fluctuations.
The market keeps fluctuating following its rally from Wednesday, April 9. A breakout higher could push it towards 5,700-5,800 area.
Conclusion
The S&P 500 neared the important 5,500 level yesterday, once again testing this crucial resistance. Today, the market is likely to open slightly lower, likely fluctuating along its resistance.
Next week brings a barrage of earnings reports from tech giants including Microsoft (MSFT) and Apple (AAPL), which will likely set the tone for market direction in early May.
The final University of Michigan consumer sentiment survey release today will provide additional insight into how households view the economy and inflation expectations, particularly in light of ongoing trade tensions.
Overall, the week is set to end on a positive note, retracing its prior week’s decline. However, it remains a news-driven market that continues to be highly sensitive to trade policy developments.
Here’s the breakdown:
- S&P 500 gained 2.03% on Thursday but is expected to open 0.2% lower today.
- Alphabet reported strong earnings, and is expected to open almost 4% higher today.
- It remains a news-driven market, with tariff developments in focus.
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 position. I encourage you to subscribe and read the details today (with a single-time 7-day free trial). Stock 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