The stock market continues its consolidation - which direction will it take next?
The S&P 500 index closed 0.01% lower on Friday after retesting the 5,850 level and rebounding, as investors bought stocks ahead of the weekend. This may have been influenced by month-end dynamics and ‘window dressing’ price action.
This morning, the S&P 500 is expected to open 0.4% lower, amid renewed tariff-related uncertainty. Sideways trading appears likely, and while the market may attempt to resume its uptrend, it could fail and retreat within its ongoing consolidation.
Investor sentiment has deteriorated, as reflected in the last Wednesday’s AAII Investor Sentiment Survey, which reported that 32.9% of individual investors are bullish, while 41.9% are bearish.
The S&P 500 remains in a key resistance zone between 5,900 and 6,000.
S&P 500: Higher Last Week
The S&P 500 gained 1.88% last week, holding above the important 5,800 level. For now, this appears to be a flat correction within a broader uptrend. The index continues to trade above its early May weekly gap-up, which is a bullish technical signal.
Nasdaq 100: Still Below 21,500
The Nasdaq 100 closed 0.11% lower on Friday, after rebounding from an intraday decline. It is expected to open 0.6% lower today, suggesting that consolidation is likely to continue.
VIX: Hovering Near Local Lows
The Volatility Index closed below 19 on Friday, reflecting moderately low market fear.
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: Trading Around 5,900
This morning, the S&P 500 futures contract is trading around the 5,900 level, remaining within a three-week consolidation range. Key support is near 5,850, based on recent lows.
Conclusion
On Friday, my outlook was confirmed, as I noted that “the S&P 500 is likely to remain in consolidation today. Being the final trading day of the month, we may see some “window dressing” into the close - which could offer support to the bulls”.
Today, the market is poised for a slight pullback. While no clear negative signals have emerged, upside momentum remains limited. Investors are awaiting the ISM Manufacturing PMI release at 10:00 a.m., followed by a speech from Fed Chair Powell at 1:00 p.m.
Here’s the breakdown:
- The S&P 500 continues to consolidate, with 6,000 as key resistance.
- No clear negative signals yet, but sideways consolidation may continue amid tariff concerns.
- The market is awaiting a series of economic data releases this week.
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Thank you.
Paul Rejczak
Stock Trading Strategist
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