Will stock prices continue their consolidation over the long holiday weekend?
Stocks gave up some of their recent gains on Wednesday, with the S&P 500 closing 0.38% lower, retreating from Tuesday’s record high of 6,025.42. The market traded largely sideways ahead of the Thanksgiving holiday. Today’s trading session will be shortened, and the index is likely to see continued fluctuations, with futures indicating a 0.2% higher open.
Investor sentiment has worsened, as shown by the Wednesday’s AAII Investor Sentiment Survey, which reported that 37.1% of individual investors are bullish, while 38.6% of them are bearish - an increase from 33.2% last week.
The S&P 500 remains near its record high, as we can see on the daily chart.
Nasdaq 100: Relatively Weaker
The Nasdaq 100 index lost 0.85% on Wednesday, pulling back from Monday’s local high. It continues to underperform the broader market. Today, the Nasdaq 100 is expected to open 0.1% higher, potentially extending its short-term consolidation.
VIX Stays Near 14
The VIX index, a measure of market volatility, reached 18.79 last Wednesday, approaching the psychologically significant 20 level, signaling rising investor caution. However, it subsequently retraced, reaching a low of 13.88 on Tuesday, confirming a rally in stock prices.
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 Extends Consolidation
The S&P 500 futures contract remains range-bound, consistent with the quiet trading typical of a holiday weekend. Support is at 5,980-6,000, and the resistance level is at around 6,050, marked by record highs.
Conclusion
The S&P 500 index is set to open slightly higher, further extending its sideways movement. With no clear negative signals, the market remains positioned to resume its record-breaking rally at some point. Today’s session is expected to be relatively quiet, ending early at 1:00 p.m.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 reached a new all-time high on Tuesday and remains near that level.
- The market is seeing increased volatility following the post-election rally.
- In my opinion, the short-term outlook is neutral.
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Thank you.
Paul Rejczak,
Stock Trading Strategist