The S&P 500 remains choppy - is a retest of 6,000 still likely?
The S&P 500 lost 0.39% on Tuesday, retracing some of its Monday’s advance. It essentially moved sideways and extended a consolidation.
The 6,000 level remains a key resistance point, which the market failed to break during last week’s rally. Today, the S&P 500 is expected to open 0.5% lower, remaining within its recent trading range.
Recently, the investor sentiment has improved, as reflected in the last Wednesday’s AAII Investor Sentiment Survey, which reported that 35.9% of individual investors are bullish, while 44.4% are bearish.
The S&P 500 index continues to fluctuate as intraday dips are consistently bought.
Nasdaq 100: Pullback Approaches?
The tech-heavy Nasdaq remains below key technical level of 21,500. Today, it’s expected to open 0.6% lower.
Currently, it looks like a correction of the uptrend as no confirmed negative signals are evident. The market may undergo more profit-taking action. A breakdown below the 21,100–21,150 range would be a bearish signal.
VIX Hovering Below 20
Last Friday, the volatility index extended its decline, reaching a local low of 17.15 and indicating less fear in the market. Since then, it has remained below 20. However, investors should remember that the lower the VIX goes, the higher the probability of a potential market reversal.
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: Breaking the Trend Line
This morning, the S&P 500 futures contract continues to retrace Monday’s advance, breaking below the upward trend line. While this doesn’t necessarily indicate the beginning of a downtrend, it may signal a shift in sentiment. The market is clearly in a consolidation phase.
Support remains near the 5,870-5,900 level, marked by the recent local low.
Conclusion
The S&P 500 is expected to open 0.5% lower on Wednesday, retracing its Monday’s advance.
I think that this uncertainty is likely to persist for some time. As a result, we may see increased volatility in the near term, with the market potentially oscillating between optimism and concern.
Here’s the breakdown:
- Stocks have retraced their Monday’s advance and today, they’re likely to open 0.5% lower.
- On Monday, the S&P 500 reached its highest level since February, nearing the 6,000 level and extending gains for those who bought based on my Volatility Breakout System.
- The 6,000 level remains a key resistance that the market failed to breach.
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Thank you.
Paul Rejczak
Stock Trading Strategist
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