The stock market may continue moving sideways, but is this simply a flat correction within the uptrend?
Stock prices fluctuated following Wednesday’s retreat, with the S&P 500 index closing 0.21% higher yesterday. This morning, the index is likely to open 0.3% higher, and short-term fluctuations may continue.
Investor sentiment worsened considerably, as shown by the 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 rebounded from its previous local highs area on Wednesday, as we can see on the daily chart.
Nasdaq 100: Consolidating Above 20,000
The Nasdaq 100 rebounded by 0.83% yesterday, continuing its consolidation above the 20,000 level. It outperformed the broader stock market, due to a 22% rally in TSLA stock following the company’s earnings release on Wednesday. Today, the Nasdaq 100 index is set to open 0.4% higher, further extending the consolidation.
VIX Moving Sideways
The VIX index, a measure of market volatility or fear, remains close to the 20 level, reflecting slightly elevated caution among investors.
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 Trading Near Previous Lows
The S&P 500 futures contract sold off to a local low of 5,801 on Wednesday and has since rebounded to around 5,870. The nearest important resistance is marked by previous local lows. The resistance is also at 5,900-5,925, while support remains at 5,800-5,825.
Conclusion
Stocks are likely to open slightly higher today, with further consolidation expected. Yesterday, I noted that “the rebound following TSLA’s earnings suggests more fluctuations and consolidation ahead, rather than the start of a new downtrend.” This outlook remains valid. The S&P 500 is likely to fluctuate ahead of significant earnings reports over the next two weeks and the upcoming presidential elections.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 rebounded after Wednesday’s retreat, continuing short-term fluctuations.
- This appears to be an extended consolidation following the rally from September’s low.
- In my opinion, the short-term outlook is neutral.
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Thank you.
Paul Rejczak,
Stock Trading Strategist