In Friday’s trading session, the S&P 500 index is expected to open lower by 0.6% following a record-breaking rally on Wednesday and consolidation on Thursday. The index reached a new record high of 5,447.25 on Wednesday after a lower-than-expected CPI reading. The market has been fluctuating along new record highs for the last three months, remaining above the 5,000 level. While the most likely scenario is more advances in the future, a breakdown below 5,000 could signal a deeper correction and downward reversal.
Investor sentiment has improved, with the AAII Investor Sentiment Survey showing that 44.6% of individual investors are bullish while 25.7% are bearish. The AAII sentiment is a contrary indicator, with highly bullish readings suggesting excess complacency and lack of fear in the market. On the other hand, bearish readings are favorable for market upturns. The S&P 500 index remained above the 5,400 level on Thursday.
The technology-focused Nasdaq 100 index reached a new record high of 19,639.45 on Thursday and closed 0.57% higher. The index extended its record-breaking rally following economic data and new highs in stocks like AAPL, MSFT, and NVDA. The VIX index, also known as the fear gauge, was as low as 11.88 on Thursday, signaling less fear in the market. Historically, a dropping VIX indicates less fear and accompanies stock market downturns.
Looking at the futures contract for the S&P 500, the new series is extending a consolidation along the 5,500 level. The resistance level is at 5,520, and the support level is at 5,450. The market may see a correction of the recent advance and a retracement of the move from around 5,350 to 5,450. However, a potential retreat could spark a new wave of demand, extending consolidation along new record highs. Despite potential profit-taking actions, the market is still trading within an uptrend.
In conclusion, the market is likely to fluctuate following its recent record-breaking advance, with a neutral short-term outlook. Despite mixed data and uncertainty, stock prices rebounded and reached new record highs. The trend is still upwards, suggesting further advances are more likely. For free follow-ups and details not available to most investors, sign up for our newsletter today.
