The S&P 500 paused its advance below key 5,900 level – will it continue higher?
The S&P 500 gained 0.1% on Wednesday, fluctuating following the substantial rally earlier this week driven by U.S.-China trade optimism. The index has been testing the important 5,900-6,000 resistance zone.
The market is expected to open 0.3% lower today, and I think a period of consolidation is likely as investors digest recent gains and today's economic data. This morning's PPI release came in lower than expected at -0.5% month-over-month, while Retail Sales were slightly higher than expected at +0.1%.
Investor sentiment has improved, as reflected in yesterday’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 remains near the 5,900 level, pausing its rally. For now, this appears to be a flat correction within the ongoing uptrend.
S&P 500 Futures Contract: Trading Along Recent Highs
This morning, the S&P 500 futures contract is still trading below the 5,900 level after significant gains since the beginning of the week. Futures are down about 0.3% in premarket trading.
Some profit-taking is currently underway. Support is currently near 5,850, marked by the recent consolidation.
Conclusion
The S&P 500 is set to open lower today, and I think the likely scenario is a continued consolidation following the recent rally. Key economic data has been mixed this morning, with PPI showing inflation cooling more than expected.
Here’s the breakdown:
- On Tuesday, S&P 500 reached the highest since March 3, breaching the 5,900 level and extending gains for those who bought based on my Volatility Breakout System.
- The market is taking a breather, with futures pointing to a lower open.
- PPI came in lower than expected at -0.5% month-over-month.
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Paul Rejczak
Stock Trading Strategist
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