S&P 500 to Rally, but Will It Break Monday’s High?

Jobs data and AAPL earnings are likely to push stock prices higher. Is this a new uptrend?

Thursday’s trading session brought more uncertainty for the stock market, with the S&P 500 index gaining 0.91% and rebounding from the 5,000 level. Overall, stock prices extended their short-term consolidation following a sell-off in the first half of April.

Two weeks ago, the index hit a new medium-term low of 4,953.56. This marked its lowest level since late February, with a decline of over 311 points or 5.9% from the record high of 5,264.85 on February 28. Last week, stock prices rebounded as tensions in the Middle East somewhat eased, and investors shifted their focus to quarterly earnings releases.

This morning, the S&P 500 is likely to open 1.1% higher following yesterday’s earnings release from AAPL, and lower-than-expected Nonfarm Payrolls released this morning. It was at +175,000 vs. expected +238,000.

On Wednesday, in my Stock Price Forecast for May, I noted “The question arises: Is this merely a correction or the beginning of a more significant downtrend? It's difficult to determine at this point. Last month, hopes for a Fed pivot were dashed as new data reignited inflation fears, and geopolitical tensions added further uncertainty. However, as of today, it appears the market is only correcting a rally that began in November.”

The investor sentiment improved, as indicated by the Wednesday’s AAII Investor Sentiment Survey, which showed that 38.5% of individual investors are bullish, while 32.5% of them are bearish. The AAII sentiment is a contrary indicator in the sense that highly bullish readings may suggest excessive complacency and a lack of fear in the market. Conversely, bearish readings are favorable for market upturns.

The S&P 500 is still trading within a short-term consolidation following its mid-April sell-off, as we can see on the daily chart.

S&P 500 to Rally, but Will It Break Monday’s High? - Image 1

Nasdaq 100 – Trading Sideways

The technology-focused Nasdaq 100 index closed 1.29% higher yesterday, following its Wednesday’s decline of 0.7%. So, it basically continued sideways.

Last week, the Nasdaq 100 was rebounding from the previous Friday's local low of 16,973.94. The 18,000 level continues to act as a key resistance. Earnings releases have resulted in mostly sideways trading. This morning, the index is poised to open 1.6% higher following AAPL's earnings release.

S&P 500 to Rally, but Will It Break Monday’s High? - Image 2

VIX Is Still Close to 15

The VIX index, also known as the fear gauge, is derived from option prices. In late March, it was trading around the 13 level. However, market volatility has led to an increase in the VIX, and on previous Friday, it reached a high of 21.4 - the highest since late October, signaling fear in the market. By Friday last week, it retraced to 15. This week, it continued to fluctuate along that level. Overall, the VIX remained relatively low despite significant moves in stocks.

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.

S&P 500 to Rally, but Will It Break Monday’s High? - Image 3


Futures Contract Is Back at 5,150

Let’s take a look at the hourly chart of the S&P 500 futures contract. This morning, it is trading at the 5,150 level again, extending pre-market advance following monthly jobs data release. Potential resistance level is at around 5,160, marked by local highs. On the other hand, support level is now at 5,100-5,120.

S&P 500 to Rally, but Will It Break Monday’s High? - Image 5


The S&P 500 index rebounded last week, largely driven by quarterly earnings releases from major tech companies. However, this Tuesday saw the bears regain control, with the index dropping over 1.5%, and on Wednesday, the market failed to extend gains after the Fed news. Yesterday, it came back up, and today, it is likely to re-test this week’s highs.

Recently, the S&P 500 was continuing a correction from the March 28 record high of 5,264.85 on Middle East tensions, strong U.S. dollar. On previous Friday, it sold off below the important 5,000 level, and last week, it retraced a much of those declines.

On Tuesday, I mentioned “While earnings reports offer cause for cautious optimism, it remains uncertain whether last week's gains signify a true upward reversal or simply a correction of recent declines.” The pullback in stock prices brought even more uncertainty, with both bullish and bearish scenarios seeming likely depending on market reactions to data and earnings.

In my Stock Price Forecast for May, I added “Where will the market go in May? There's a popular saying: 'Sell in May and go away,' but statistics don't consistently support such clear seasonal patterns or cycles. The safe bet for May is likely sideways trading, with investors digesting recent data suggesting that inflation may not be transitory, and the Fed could maintain its relatively tight monetary policy. However, economic data isn't entirely negative, and strong earnings from companies may continue to fuel the bull market.”

For now, my short-term outlook remains neutral.

Here’s the breakdown:

  • The S&P 500 is likely to open much higher following earnings release from Apple and jobs data.
  • On Friday, April 19, stock prices were the lowest since February, indicating a correction of the medium-term advance.
  • In my opinion, the short-term outlook is neutral.

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Thank you.

Paul Rejczak,
Stock Trading Strategist