Will stocks resume their uptrend following a lower-than-expected CPI reading?
On Tuesday, stocks experienced a slight pullback, with the S&P 500 index closing 0.29% lower. The market has continued to fluctuate after its record-breaking rally fueled by the presidential election and an FOMC interest rate cut. This morning, the S&P 500 is expected to open 0.2% higher following the release of the Consumer Price Index (CPI), which met expectations with a +0.2% month-over-month increase.
Last week, the investor sentiment improved again, as shown in the Wednesday’s AAII Investor Sentiment Survey, which reported that 41.5% of individual investors are bullish, while 27.6% of them are bearish.
The S&P 500 remained near the 6,000 level yesterday, as we can see on the daily chart.
Nasdaq 100: Fluctuating Along 21,000
The Nasdaq 100 index closed 0.17% lower on Tuesday, continuing its sideways trend. The support level remains between 20,800 and 20,900, marked by last Thursday’s gap up. The index is expected to open 0.3% higher today, though further consolidation or volatility may follow last week’s record-breaking rally.
VIX Continues Moving Along 15
The VIX index, a measure of market volatility, declined by over 20% last Wednesday, moving back below the 20 level and nearing the 15 level. This confirmed risk-on sentiment and a lack of fear in the market. It has since moved sideways.
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: Up After CPI Release
On Monday, the S&P 500 futures contract retreated from a record high of around 6,053. This morning, it is trading above the 6,000 mark following the CPI data. Resistance is at 6,050-6,060, while support is around 5,980-6,000. Although the market appears overbought in the short term, no confirmed negative signals are evident.
Conclusion
The S&P 500 is set to open 0.2% higher this morning, buoyed by the CPI release. While the market remains within a consolidation, there could be an attempt to break higher.
On Monday, I noted that “this week could see a period of increased volatility or consolidation.” This proved correct.
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 poised to open higher following the CPI data.
- 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