Stocks are expected to extend their advances this morning, but could a short-term correction be coming?
The S&P 500 index closed 0.05% lower on Friday after reaching a new record high of 6,600.21. The market fluctuated ahead of the key FOMC interest rate announcement due this Wednesday. This morning, the index is set to open 0.2% higher, likely reaching a new record above the 6,600 level.
Investor sentiment has weakened again, as reflected in last Wednesday’s AAII Investor Sentiment Survey, which reported that 28.0% of individual investors are bullish, while 49.5% are bearish.
The S&P 500 remains near its record high, as shown on the daily chart.
S&P 500 Futures Contract Crawling Along Upward Trend Line
This morning, the S&P 500 futures contract is trading near its new record high of around 6,610. Potential resistance is around 6,650, while support is now at 6,580, among others.
The market appears to be in a topping pattern ahead of a more meaningful downward correction. However, still no clear negative signals are evident at this time.
Market Outlook: New Highs but Uncertainty Looms
The S&P 500 is likely to open slightly higher on Monday, potentially reaching a new record above the 6,600 level. However, uncertainty ahead of Wednesday’s Fed announcement may trigger consolidation and profit-taking at some point.
Here's what I think is most likely:
- The S&P 500 will likely extend its uptrend slightly this morning, with all eyes on the Fed.
- My Volatility Breakout System is currently long in the market.
- I decided to close a profitable long trade in TSLA last week.
What This Means for Your Portfolio
For individual investors, this environment calls for careful position management. While the market continues to advance, the combination of low volatility, seasonal weakness signals, and stretched valuations suggests that defensive positioning may become increasingly important in the weeks ahead.
The current market conditions highlight the value of having a systematic approach to investing rather than trying to time every market move. Whether you're using technical systems like the Volatility Breakout System or following seasonal patterns, having a disciplined framework becomes crucial during uncertain times.
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Thank you.
Paul Rejczak
Stock Trading Strategist