Stocks extended their downtrend – is a short-term bottom in sight?Stocks continued their downtrend yesterday, with the S&P 500 closing 1.22% lower. However
Stocks extended their downtrend – is a short-term bottom in sight?
Stocks continued their downtrend yesterday, with the S&P 500 closing 1.22% lower. However, it rebounded sharply in the second half of the day as investors awaited President Trump’s speech in Congress. Overall, the market traded within a consolidation after breaking lower.
Today, the S&P 500 is set to open 0.1% higher following a lower-than-expected ADP Non-Farm Employment Change report, which came in at +77,000.
Investor sentiment worsened considerably last week, as shown by Wednesday’s AAII Investor Sentiment Survey, which reported that only 19.4% of individual investors are bullish, while 60.6% of them are bearish.
The S&P 500 reached its lowest level since the presidential election, as we can see on the daily chart.
Nasdaq 100 Also Moving Lower
The Nasdaq 100 closed 0.36% lower on Tuesday, nearing the 20,000 level before rebounding and retracing some of the decline. Short-term volatility suggests that the market may have reached a local bottom, making a consolidation or rebound likely.
Key support remains around 20,000, while resistance is at 20,500-20,600.
VIX: Highest Since December
The VIX index, a measure of market volatility, reached a new local high of 26.35 yesterday, indicating fear in the market and confirming the downtrend in stocks.
Historically, a dropping VIX indicates less fear in the market, and a 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: Near 5,800
This morning, the S&P 500 futures contract is pulling back after yesterday’s intraday rebound. Key resistance remains around 5,850, marked by recent local lows, while support is at 5,750. The contract continues to trade below its downward trendline.
Conclusion
Stocks are likely to open slightly higher this morning, extending consolidation after recent declines.
Is the market headed much lower? Given rising geopolitical uncertainty and worsening investor sentiment, no clear positive signals are evident. It seems the bull market may be due for a longer pause.
Quoting my Stock Price Forecast for March 2025 “the stock market is poised for a positive start to the month, though this may simply be another part of its medium-term consolidation. The S&P 500 keeps fluctuating following its post-election rally.”
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 extended its downtrend, reaching its lowest level since early November.
- The stock 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