Stocks are set to reach a new record high this morning, but will the uptrend continue?
Stock prices extended their gains on Friday, but the S&P 500 Index closed 0.01% lower after pulling back from its January 24 record high of 6,128.18. Today, the index is set to open 0.3% higher, reaching a new all-time high.
Will the uptrend continue? It’s hard to say, as the market awaits further economic data.
Investor sentiment worsened again, as shown by the last Wednesday’s AAII Investor Sentiment Survey, which reported that 28.4% of individual investors are bullish, while 47.3% of them are bearish.
The S&P 500 index has approached its late-January record high, as we can see on the daily chart.
S&P 500 Gained Last Week
The S&P 500 gained 1.47% last week, moving back above the 6,100 level and nearing its record high. Support is now around 5,900, marked by recent local lows.
Nasdaq 100 Hit a New Record High
The Nasdaq 100 closed 0.38% higher on Friday after reaching a new record high of 22,139.43, slightly exceeding its high from December 16. Today, the index is expected to open 0.4% higher, further extending its bull market. Support is now at 22,000.
VIX: Below 15
The VIX index, a measure of market volatility, closed below the 15 level on Friday, indicating a lack of 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 Trading Around 6,150
This morning, the S&P 500 futures contract is trading near its record highs, slightly above the 6,150 level. Support is now at 6,100–6,120, marked by previous resistance levels.
Conclusion
Stocks are likely to open higher this morning, with the S&P 500 Index reaching a new record high, slightly exceeding its late January high. Hopes for a potential resolution to the Russia-Ukraine conflict fueled the rally last week, and in the near term, the market could see consolidation or profit-taking, with investors reacting to geopolitical developments and upcoming economic data.
In my Stock Price Forecast for January 2025, I noted “...recent rallies have provided selling opportunities. What will February bring? The earnings season is in full swing, likely adding to volatility. Political developments are increasing uncertainty. The market's ongoing consolidation since November may be forming a medium-term topping pattern ahead of some more meaningful downward correction. However, no confirmed bearish signals have appeared yet.”
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 approached its late-January record high on Friday.
- 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