Stocks fluctuated yesterday - could they be forming a top?
The S&P 500 experienced volatility on Thursday, initially moving much lower before closing 0.43% below Wednesday’s close. It rebounded from a daily low of around 6,085. Today, it is set to open 0.1% higher, likely extending its short-term consolidation following recent gains.
Investor sentiment remained relatively weak, as shown by the Wednesday’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 continues to fluctuate around the 6,100 level, as we can see on the daily chart.
Nasdaq 100 Remains Near 22,000
The Nasdaq 100 closed 0.48% lower yesterday after rebounding from a daily low of around 21,880. However, it once again closed above the 22,000 level. Today, it is expected to open 0.4% higher, further extending its short-term consolidation around the support of 22,000.
No negative signals are evident, but tech stocks may experience a more pronounced profit-taking at some point.
VIX Fluctuates Above 15
The VIX index, a measure of market volatility, closed below 15 last Friday, indicating a lack of fear in the market. This week, it has remained in consolidation, hovering around the 15 level.
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: Back in Consolidation
This morning, the S&P 500 futures contract is trading around 6,140, after pulling back to a local low of 6,103 yesterday.
Support remains at 6,100–6,120, marked by previous resistance levels. It still appears to be a flat correction of the uptrend.
Conclusion
Today, the stock market is expected to open mixed, with the S&P 500 likely to start flat and the Nasdaq 100 higher. Overall, the market is likely to continue consolidating near record highs. Investors are awaiting key PMI data releases at 9:45 a.m.
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 is likely to extend its consolidation amid mixed economic signals, geopolitical news.
- The stock market is still seeing increased volatility following the post-election rally.
- In my opinion, the short-term outlook is neutral.
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 futures contract position. I encourage you to subscribe and read the details today (with a single-time 16-day free trial). Stocks 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