Stocks dropped even further - will they rebound today?
Thursday’s trading session saw further declines in the stock market, confirming that Wednesday’s rebound was only temporary. The S&P 500 closed 1.39% lower after reaching a new local low of 5,504.65.
The key question now is whether this was the final thrust of a correction before a rebound or a trend change. Will the market continue downward despite very weak individual investor sentiment and oversold conditions?
Today, the S&P 500 is expected to open 0.8% higher, at least pausing its decline. The market may enter another short-term consolidation at this level.
Investor sentiment remains bearish, as shown in the Wednesday’s AAII Investor Sentiment Survey, which reported that only 19.1% of individual investors are bullish, while 59.2% of them are bearish.
The S&P 500 continued its downtrend yesterday, as we can see on the daily chart.
Nasdaq 100 Extended Its Declines
The Nasdaq 100 lost 1.89% on Thursday, reaching a new local low of 19,152.57. However, it essentially extended a short-term consolidation following Tuesday’s sell-off.
The key resistance level remains around 19,800–20,000, marked by recent support. Today, the Nasdaq 100 is expected to open 0.9% higher following an overnight rebound.
VIX Pulling Back
The VIX index, a measure of market volatility, is pulling back despite new lows in stock prices. Yesterday, it declined to a local low of 23.46.
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: Moving Sideways
This morning, the S&P 500 futures contract is trading below the 5,600 level, fluctuating after recent declines.
Resistance remains at 5,600–5,650, while support is around 5,530-5,550. The contract continues to trade below its short-term downward trendline.
Conclusion
Stocks are expected to rebound this morning as sentiment improves following yesterday’s sell-off. At some point, the market will likely retrace some of its recent relentless declines.
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 is expected to rebound this morning.
- No confirmed positive signals yet, though the market appears oversold.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist