Will stocks continue their rebound, or are they just pausing before resuming the downtrend?
On Thursday, stocks continued their short-term consolidation, with the S&P 500 closing 0.22% lower after briefly breaking the 5,700 level again. The market remains in a sideways pattern following last Friday’s and Monday’s rebound. This morning, the S&P 500 is expected to open 0.2% lower, likely extending its consolidation further.
Investor sentiment remains bearish, as shown in the 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 continues to pull back from the 5,700 level, as we can see on the daily chart.
Nasdaq 100: Pulling Back from 20,000
The Nasdaq 100 closed 0.30% lower on Thursday, once again pulling back from the 20,000 resistance level. It remains in a short-term consolidation, with support around 19,500. Today, the Nasdaq 100 is expected to open 0.4% lower.
VIX: Below 20
The VIX index, a measure of market volatility, continued pulling back this week, reaching a low of 19.30 yesterday. This confirms reduced fear 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.
S&P 500 Futures Contract Holding Near 5,700
This morning, the S&P 500 futures contract is trading near the 5,700 level, continuing its consolidation. Resistance is at 5,750–5,760, while support lies at 5,680–5,700, the previous resistance zone.
Conclusion
Today’s session is expected to start slightly lower, with the S&P 500 opening down 0.2%. The market may see further uncertainty and sideways movement.
The market has sold off sharply in recent weeks, and it may now consolidate or attempt a more meaningful upward correction. However, 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.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 is likely to continue its short-term consolidation.
- Wednesday’s FOMC decision triggered volatility, but the market remains range-bound.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist