Are stocks in a new uptrend, or is this just an upward correction?
Stocks consolidated on Tuesday, with the S&P 500 closing 0.16% higher, following Monday's strong rebound. The index reached its highest level since March 6, retracing its recent declines.
This morning, the S&P 500 is expected to open 0.1% lower, continuing its short-term consolidation.
Investor sentiment remains bearish, as shown in last Wednesday’s AAII Investor Sentiment Survey, which reported that 21.6% of individual investors are bullish, while 58.1% of them are bearish.
The S&P 500 has reached its early March consolidation, as we can see on the daily chart.
Nasdaq 100: Above 20,000
This morning, the tech index is expected to open 0.2% lower. It remains unclear whether this is a new uptrend or merely a correction within the broader downtrend. Resistance level is around 20,600, marked by previous highs, while support is at 20,000.
VIX Extends Its Pullback
The VIX index, a measure of market volatility, continued to decline yesterday, reaching a low of 17.01 and signaling reduced market fear
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 within a consolidation, or a flat correction of the short-term uptrend. Potential resistance remains around 5,880-5,900, marked by previous highs, while support is around 5,800.
Conclusion
Stocks are likely to open flat on Wednesday, extending Tuesday fluctuations. This appears to be an upward correction following the decline that began on February 19 and exhausted on March 13.
For now, my short-term outlook is neutral.
I think that no positions are justified from the risk/reward point of view.
Here’s the breakdown:
- The S&P 500 is likely to extend its Tuesday’s fluctuations.
- The market still appears to be in a correction rather than a new uptrend.
- 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). Stock 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