Are stock prices forming a short-term bottom, despite heightened pessimism?
The S&P 500 index closed 1.12% higher on Wednesday, rebounding from Tuesday’s local low and extending a short-term consolidation that began after Tuesday’s sell-off. Today, the market is set to open 1.3% lower due to geopolitical uncertainty, economic data, and currency volatility. A retest of recent lows or even a slight extension of the downtrend, appears likely.
Investor sentiment remains weak, as shown in yesterday’s AAII Investor Sentiment Survey, which reported that only 19.3% of individual investors are bullish, while 57.1% of them are bearish.
The S&P 500 is moving sideways following its recent declines, as we can see on the daily chart.
S&P 500 Futures Contract: Testing Lows
This morning, the S&P 500 futures contract is pulling back after yesterday’s 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
Thursday’s session is set for a weak open. However, if the market holds above key support at 5,730–5,740, consolidation remains likely.
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 retraced its post-election advance.
- 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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Thank you.
Paul Rejczak,
Stock Trading Strategist