Consumer inflation data failed to trigger a decisive move. Will stocks break out of the range?
Stocks haven’t done much on Wednesday, even with the important Consumer Price Index (CPI) release. The S&P 500 index closed just 0.02% higher, continuing its short-term consolidation after a record-breaking rally fueled by the presidential election and an FOMC interest rate cut. This morning, the S&P 500 is expected to open 0.1% lower following the release of the Producer Price Index (PPI), which met expectations with a +0.2% month-over-month increase.
Investor sentiment has further improved, as shown in yesterday’s AAII Investor Sentiment Survey, which reported that 49.8% of individual investors are bullish, while 28.3% of them are bearish.
The S&P 500 remained in its short-term consolidation yesterday, as we can see on the daily chart.
Nasdaq 100 Near 21,000
The Nasdaq 100 index lost 0.16% yesterday, continuing to fluctuate around the 21,000 level. The support level remains between 20,800 and 20,900, marked by last Thursday’s gap up. The index is set to open flat today, extending its consolidation after last week’s record-breaking rally.
VIX Declines Further
The VIX index, a measure of market volatility, declined by over 20% last Wednesday, and has moved along the 15 level since. Yesterday, it extended its decline, approaching the 14 level. This confirmed risk-on sentiment and a lack of 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.
Futures Contract: Above 6,000
On Monday, the S&P 500 futures contract pulled back from a record high of around 6,053. This morning, it is trading along the 6,020 level after the PPI report. Resistance remains between 6,050 and 6,060, with support at 5,980–6,000. Although the market appears overbought, no confirmed negative signals are evident.
Conclusion
Thursday’s trading session is set to begin on a rather neutral note after the PPI announcement. The market remains in a consolidation, likely a flat correction within the uptrend.
Earlier this week, I noted that “this week could see a period of increased volatility or consolidation,” which has played out as expected.
In my Stock Price Forecast for November 2024, I wrote “The key question is: Will this sell-off mark the start of a medium-term downtrend, or is it merely a downward correction within an uptrend? For now, it appears to be a correction, but next week’s presidential elections could add to volatility.”
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 is set for a neutral opening.
- The market continues to consolidate after a post-election rally.
- In my opinion, the short-term outlook is neutral.
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Thank you.
Paul Rejczak,
Stock Trading Strategist