Will the stock market resume its uptrend and reach a new record high?
Stock prices continued their short-term uptrend on Wednesday, with the S&P 500 Index closing 0.39% higher after breaking the 6,000 level on Tuesday. The market kept retracing its recent declines amid the upcoming earnings reports and economic data. Today, the S&P 500 is expected to open 0.3% higher, slightly extending the advance.
Investor sentiment worsened yesterday, as shown by the AAII Investor Sentiment Survey, which reported that 33.3% of individual investors are bullish, while 42.9% of them are bearish.
The S&P 500 index continues to trade around the 6,000 level, as we can see on the daily chart.
Nasdaq 100 Also Higher
The Nasdaq 100 closed 0.42% higher on Wednesday, extending its short-term uptrend and retracing more of its recent declines. Resistance remains around 21,800, marked by the late January trading range, while support is at 21,000-21,200, marked by recent lows.
Today, the Nasdaq 100 is expected to open 0.1% higher following QCOM’s earnings report yesterday. Investors are now awaiting AMZN’s report after the session close.
VIX Extends Decline
The VIX index, a measure of market volatility, advanced to the daily high of 22.51 last Monday, the highest level since December 20. However, it later retraced most of that move, falling to 14.90 on Friday. On Monday, it was briefly above 20.42 before pulling back, and yesterday, it dipped below 16.
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 Near 6,100
This morning, the S&P 500 futures contract is trading near the 6,100 level following yesterday’s advance. Potential resistance is around 6,150, marked by record highs, while support is now at 6,060, marked by recent highs.
Conclusion
Stocks are likely to open slightly higher today, extending yesterday’s advance. The market has retraced most of its recent decline and is now trading within last Friday’s daily range. Investors are closely watching earnings reports and key economic data this week. Today, AMZN will report earnings, and tomorrow, key monthly jobs data will be released.
On Monday, 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 has retraced its recent weakness amid earnings and economic data.
- 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