A Positive Month-End for Stocks?

Stocks are likely to extend their gains, but will the S&P 500 reach a new record?

The S&P 500 index closed 0.53% higher on Thursday, moving near last Friday’s low of around 6,089. Today, the index is expected to open 0.5% higher, driven by AAPL stock following its earnings release.

Investor sentiment worsened, as shown by Wednesday’s AAII Investor Sentiment Survey, which reported that 41.0% of individual investors are bullish, while 34.0% of them are bearish.

The S&P 500 index continues its rebound from Monday’s low, as we can see on the daily chart.

A Positive Month-End for Stocks? - Image 1

 

Nasdaq 100 Also Higher

The Nasdaq 100 gained 0.45% on Thursday after declining by 0.2% on Wednesday. The technology sector remains uncertain following recent AI-related news. However, today, the Nasdaq 100 is set to open 0.7% higher, driven by Apple's earnings report. Resistance is around 21,800, marked by the previous trading range, while support is at 21,300, marked by recent lows.

A Positive Month-End for Stocks? - Image 2

VIX Declines

The VIX index, a measure of market volatility, advanced to the daily high of 22.51 on Monday, the highest level since December 20. However, it has since retraced much of its advance, reaching as low as 15.32 yesterday, 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.

A Positive Month-End for Stocks? - Image 3

 

S&P 500 Futures Contract Extends Gains

This morning, the S&P 500 futures contract is trading well above the 6,100 level, extending its short-term uptrend and reaching a new local high of 6,130. Resistance is at 6,140-6,160, marked by last week’s highs. On the other hand, support is now at 6,100-6,120.

A Positive Month-End for Stocks? - Image 5

 

Conclusion

The stock market is likely to extend its rebound from Monday’s low this morning, with sentiment improving after Apple’s earnings release.

The key question: Will the S&P 500 resume its record-breaking rally, or is this just a temporary rebound within a broader consolidation?

At this moment, the market appears to be advancing within a consolidation that began in November.

On January 6, in my Stock Price Forecast for January 2025, I wrote thatthe stock market is poised for continued fluctuations following the post-election rally in November. Although the S&P 500 dipped by 2.5% last month, this appears to be just a correction of November’s gains.

Will the market resume its uptrend and reach new record highs? This appears likely at some point, driven by growing optimism ahead of Trump’s upcoming inauguration on January 20. However, rallies may provide selling opportunities, leading to a medium-term consolidation phase.

For now, my short-term outlook is neutral.

Here’s the breakdown:

  • The S&P 500 is likely to extend its short-term uptrend, nearing its previous consolidation.
  • 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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Paul Rejczak,
Stock Trading Strategist