Stocks have reached record highs, but is there any upside left?
Stocks extended their uptrend once again, with the S&P 500 reaching yet another record high of 6,147.43, closing 0.24% higher than Tuesday. However, today, the S&P 500 is expected to open 0.2% lower, likely fluctuating after its recent gains.
Will the uptrend continue? It’s hard to say, as investors await further economic data. A profit-taking could happen at some point.
Investor sentiment remained relatively weak, as shown by the yesterday’s AAII Investor Sentiment Survey, which reported that 29.2% of individual investors are bullish, while 40.5% of them are bearish.
The S&P 500 index continued its uptrend, as we can see on the daily chart.
Nasdaq 100 Edges Higher
The Nasdaq 100 closed just 0.05% higher after reaching a new all-time high of 22,222.61. Today, it is expected to open 0.3% lower, extending its short-term consolidation above the 22,000 support level.
No negative signals are evident, but tech stocks may experience profit-taking at some point.
VIX: Still Above 15
The VIX index, a measure of market volatility, closed below the 15 level on Friday, indicating a lack of fear in the market. Yesterday, it remained in consolidation, hovering around the 15 level
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 Faces More Uncertainty
This morning, the S&P 500 futures contract is trading around 6,150, extending its consolidation. Support remains at 6,100–6,120, marked by previous resistance levels. For now, it appears to be a flat correction of the uptrend.
Conclusion
Thursday’s trading session is set to open slightly lower. The market is likely to continue consolidating at record highs.
Last week’s rally was fueled by hopes for a resolution to the Russia-Ukraine conflict, but in the near term, the market may consolidate or face profit-taking, with investors reacting to geopolitical developments and upcoming economic data.
In my Stock Price Forecast for January 2025, I noted “...recent rallies have provided selling opportunities. What will February bring? The earnings season is in full swing, likely adding to volatility. Political developments are increasing uncertainty. The market's ongoing consolidation since November may be forming a medium-term topping pattern ahead of some more meaningful downward correction. However, no confirmed bearish signals have appeared yet.”
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 hit another new record high yesterday.
- 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