The S&P 500 remains elevated - is it forming a top?
The stock market saw gains on Thursday, with the S&P 500 closing 0.54% higher and reaching a new record of 6,304.69. On Wednesday, the index rebounded from around 6,200, reaffirming that level as a key support. Today, the S&P 500 is expected to open 0.1% higher, likely fluctuating near its all-time high.
Investor sentiment has slightly deteriorated, as reflected in the Wednesday’s AAII Investor Sentiment Survey, which reported that 39.3% of individual investors are bullish, while 39.0% are bearish.
The S&P 500 continues to hover near record highs, as the daily chart shows.
Nasdaq 100: Another New Record
The Nasdaq 100 gained 0.74% on Thursday, supported by new record highs in Nvidia and Microsoft. It reached a new all-time high of 23,104.72.
While no strong bearish signals have emerged yet, the recent price action may be forming a potential topping pattern.
VIX Declines
The Volatility Index (VIX) dropped to a local low of 15.70 last Thursday, signaling continued strength in equities. This Wednesday, it rebounded to around 19.50 during the intraday market dip but reversed and continued the current consolidation. Yesterday, the VIX closed at its lowest level since last Friday.
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 Continues Its Uptrend
This morning, the S&P 500 futures contract is trading near 6,350 after hitting a new record of 6,357. On Wednesday, the index bounced from an intraday low around 6,241.
Resistance is near 6,360, while support is at 6,300-6,320.
Markets remain highly sensitive to geopolitical developments and could stay volatile in the near term.
Crude Oil Update: Moving Higher Again
Crude oil closed 1.75% higher yesterday and is trading another 1.9% higher this morning. The rebound has been supported by a larger-than-expected draw in U.S. crude inventories, as reported by the EIA on Wednesday.
The recent sell-off exhausted near the key support zone of $65–66.
For oil markets specifically, these developments are worth monitoring:
- The EU approved an 18th sanctions package against Russia, targeting its oil and energy sectors. The measures also include a proposal to lower the G7's price cap on Russian oil exports. President Donald Trump threatened further U.S. sanctions, warning buyers of Russian oil unless Moscow agrees to a peace deal within 50 days. Markets are awaiting details on any U.S. follow-up action.
- U.S. crude inventories fell sharply, with a 3.9 million-barrel drop last week, exceeding analysts' forecasts and suggesting a tightening oil market. This data came from the U.S. Energy Information Administration.
- OPEC kept its demand forecast steady for 2025 and 2026, expressing hope that global trade tensions will ease. The IEA noted that despite increased output from OPEC+, global oil supplies remain tighter than expected.
Oil: Resuming the Uptrend?
On Wednesday, crude oil rebounded from key support at $65–66, breaking back above its nearly month-long upward trend line. It has since moved above $67, with potential resistance around $68–69.
My short-term outlook on oil remains neutral.
Conclusion
Stocks are set to open slightly higher today, with the S&P 500 likely fluctuating near its record highs. Sentiment remains bullish following earnings reports and hopes for trade deals progress.
However, there's also a lack of strong bullish catalysts to push the market significantly higher in the near term.
Investors are now turning their attention to corporate earnings, with the major tech companies set to report starting next week.
Here’s the breakdown:
- The S&P 500 remains near its record high.
- The recent rally extended gains for those who bought based on my Volatility Breakout System.
- There are no clear bearish signals yet, but a deeper downward correction is not out of the question at some point.
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Thank you.
Paul Rejczak
Stock Trading Strategist
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