Stocks Rebounded: What’s Next?
Stocks are likely to open flat as investors await the Fed's decision and earnings reports.
Stocks continued their rebound yesterday, retracing more of Monday’s pullback after news of advancements in Chinese AI technology that could threaten U.S. companies. The S&P 500 index closed 0.92% higher, moving back above the 6,000 level. Today, it is expected to open 0.2% lower, but the market will be focused on the key FOMC release, scheduled for 2:00 p.m. Additionally, important earnings reports from META, MSFT, and TSLA will be released after the session closes. Overall, it is likely to be a highly volatile trading day.
Investor sentiment had significantly improved last week, as shown by the Wednesday’s AAII Investor Sentiment Survey, which reported that 43.4% of individual investors are bullish, while 29.4% of them are bearish.
The S&P 500 index continues its two-month-long consolidation, as we can see on the daily chart.
Nasdaq 100 Also Rebounded
The Nasdaq 100 gained 1.59% on Tuesday, following Monday’s sell-off of around 3%. Today, its movement will be driven by the FOMC announcement and key earnings releases from major tech companies. The Nasdaq 100 is expected to open 0.1% higher. Resistance remains around 21,500, while support is at 20,800-21,000.
VIX Moving Lower
The VIX index, a measure of market volatility, advanced to the daily high of 22.51 on Monday, the highest level since December 20. However, it retraced much of its advance on Monday and Tuesday as stock prices rebounded.
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 Pulls Back from 6,100
This morning, the S&P 500 futures contract is trading below the 6,100 level after reaching a local high of around 6,012. Overall, the market continues its consolidation following last week’s pullback from new highs. Support remains at 5,950-6,000.
Conclusion
Today’s trading session will largely depend on the Fed’s interest rate decision at 2:00 p.m. and earnings reports from META, MSFT and TSLA after the session closes. The S&P 500 is set to open 0.2% lower following its rebound from Monday and Tuesday.
On January 6, in my Stock Price Forecast for January 2025, I wrote that “the stock market is poised for continued fluctuations following the post-election rally in November. Although the S&P 500 dipped by 2.5% last month, this appears to be just a correction of November’s gains.
Will the market resume its uptrend and reach new record highs? This appears likely at some point, driven by growing optimism ahead of Trump’s upcoming inauguration on January 20. However, rallies may provide selling opportunities, leading to a medium-term consolidation phase.”
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 rebounded after Monday’s decline; today, the focus is on the Fed and earnings.
- The stock market is still seeing increased volatility following the post-election rally.
- In my opinion, the short-term outlook is neutral.
The full version of today’s analysis - today’s Stock Trading Alert - is bigger than what you read above, and it includes the additional analysis of the Apple (AAPL) stock and the current S&P 500 futures contract position. I encourage you to subscribe and read the details today (with a single-time 16-day free trial). Stocks Trading Alerts are also a part of our Diamond Package that includes Gold Trading Alerts and Oil Trading Alerts.
And if you’re not yet on our free mailing list, I strongly encourage you to join it - you’ll stay up-to-date with our free analyses that will still put you ahead of 99% of investors that don’t have access to this information. Join our free stock newsletter today.
Thank you.
Paul Rejczak,
Stock Trading Strategist