Did the market hit bottom on Friday, or was it just another rebound in a downtrend?
Stock prices advanced on Friday, with the S&P 500 closing 0.55% higher. Before that, the market had extended its downtrend, reaching a new local low of 5,666.29 - the lowest level since last September. Today, the index is expected to open 1.4% lower amid geopolitical tensions and uncertainty over tariffs.
Investor sentiment remains weak, as shown in last Wednesday’s AAII Investor Sentiment Survey, which reported that only 19.3% of individual investors are bullish, while 57.1% of them are bearish.
The S&P 500 rebounded from a new low on Friday, as we can see on the daily chart.
S&P 500 Lost Over 3% Last Week
The S&P 500 lost 3.10% last week, extending its recent declines. While it still appears to be a downward correction, there are no clear bullish signals, and the market could extend its downtrend. Support is now at 5,600–5,650, while resistance is around 5,900.
Nasdaq 100 Holds Above 20,000
The Nasdaq 100 gained 0.74% on Friday, rebounding from a new local low of 19,736.81 before closing above 20,000 once again. Key support remains near 20,000, while resistance is at 20,500–20,600. Today, the Nasdaq 100 is expected to open 1.7% lower following overnight weakness.
VIX Remains Relatively High
The VIX index, a measure of market volatility, reached a new local high of 26.56 on Friday. It continues to trade at elevated levels, reflecting increased 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: Testing Lows Again
This morning, the S&P 500 futures contract is trading significantly lower, retracing most of Friday’s rebound. Sentiment weakened over the weekend amid rising geopolitical uncertainty and tariff concerns.
Key resistance is now around 5,780-5,800, while potential support is at 5,650. The contract remains below its downward trendline.
Conclusion
The S&P 500 is set to open much lower today as investor sentiment worsens following Friday’s rebound. Markets will be awaiting key economic data this week, including the JOLTS Job Openings report tomorrow and the Consumer Price Index release on Wednesday.
Is the market headed much lower? 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.
I think that no positions are justified from the risk/reward point of view.
Here’s the breakdown:
- The S&P 500 extended its downtrend on Friday before rebounding to close higher.
- The stock market is still seeing increased volatility following the post-election rally.
- In my opinion, the short-term outlook is neutral.
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Thank you.
Paul Rejczak,
Stock Trading Strategist