The S&P 500 rebounded on Friday, but was it a true upward reversal?
Stock prices rebounded on Friday as investor sentiment improved ahead of the weekend and due to oversold conditions. The S&P 500 gained 2.13%, closing above the 5,600 level. On Thursday, it had reached a new local low of 5,504.65, the lowest since September 11 of last year.
Today, the S&P 500 is expected to open 0.1% lower, likely moving sideways following Friday’s rebound. Has the downtrend reversed? Likely not, but the market may see a correction after recent declines.
Investor sentiment remained bearish last week, as shown in last Wednesday’s AAII Investor Sentiment Survey, which reported that only 19.1% of individual investors are bullish, while 59.2% of them are bearish.
The S&P 500 rebounded from 5,500, as we can see on the daily chart.
S&P 500: Over 2% Lower Last Week
The S&P 500 lost 2.27% last week, extending its prior week’s 3.1% decline. The market may have found a temporary bottom, confirming the importance of the 5,500 support level. On the other hand, resistance is now at 5,800.
Nasdaq 100 Neared 20,000 Again
The Nasdaq 100 closed 2.49% higher on Friday, retracing some of its recent declines. However, it remains in a short-term consolidation following last Tuesday’s sell-off. Today, it may attempt to break higher and retrace more of its losses. The key resistance level remains around 20,000, previously a support level.
VIX Pulled Back Further
The VIX index, a measure of market volatility, continued pulling back last week, reaching a low of 21.48 on Friday, signaling 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: Breaking the Trend Line
This morning, the S&P 500 futures contract (March series) is trading above 5,600, after breaking above its downward trend line on Friday. Potential resistance lies at 5,680–5,700, marked by recent price fluctuations.
Conclusion
The S&P 500 is expected to open slightly higher today, likely fluctuating after Friday’s rebound. The market has sold off sharply in recent weeks, and it may now consolidate or attempt a more meaningful upward correction. Investors are awaiting Wednesday’s FOMC Interest Rate Decision.
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.
Here’s the breakdown:
- The S&P 500 is expected to fluctuate after Friday’s rebound.
- Investors are awaiting Fed news on Wednesday.
- In my opinion, the short-term outlook is neutral.
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Paul Rejczak,
Stock Trading Strategist