Which direction will stock prices move? Uncertainty persists as investors await key earnings reports.
Stocks remained basically unchanged on Tuesday, with the S&P 500 index closing 0.16% higher, extending its short-term consolidation. Investors are awaiting key earnings reports, economic data, and next week’s U.S. presidential elections. Futures point to a virtually flat opening this morning after a higher-than-expected ADP Non-Farm Employment Change report and lower-than-expected Advance GDP figures.
Investor sentiment worsened considerably last week, as shown in Wednesday’s AAII Investor Sentiment Survey, which reported that 37.7% of individual investors are bullish, while 29.9% of them are bearish, up from 25.4% last week.
The S&P 500 continues to consolidate in the short term, as we can see on the daily chart.
Nasdaq 100: New Local High
The Nasdaq 100 performed relatively stronger, gaining 0.98% yesterday. The market advanced in anticipation of GOOG's earnings. Today, attention is focused on post-session quarterly earnings reports from MSFT and META, with AAPL, AMZN, and INTC scheduled for tomorrow. Resistance is near 20,600, with support at 20,000.
VIX: Steady Around 20
The VIX index, a measure of market volatility, remains near the 20 level, reflecting heightened caution 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: Ongoing Fluctuations
The S&P 500 futures contract remained below the 5,900 level yesterday, retracing an overnight advance this morning despite a rally in GOOG stock. Sentiment turned negative following earnings from CAT and LLY, among others.
Resistance holds at 5,900-5,925, with support at 5,800-5,825. Consolidation has now extended for two weeks, and upcoming data and earnings could prompt a breakout in either direction.
Conclusion
The S&P 500 index is set to open flat this morning, following earnings releases and key economic data. Later today, technology sector volatility may increase as investors await earnings from META and MSFT.
On Friday, I wrote “The S&P 500 is likely to fluctuate ahead of significant earnings reports over the next two weeks and the upcoming presidential elections.” This outlook still applies, as the market could experience more volatility due to economic data, earnings, and the upcoming presidential elections.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 extended its short-term consolidation on Tuesday.
- This still appears to be an extended consolidation following the rally from September’s low, with investors awaiting key announcements.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist