Will the Stock Market Resume Its Uptrend?
Stocks face uncertainty after the Fed’s release and earnings. Will the uptrend continue?
Stock prices pulled back on Wednesday, with the S&P 500 index closing 0.47% lower after gaining 0.9% on Tuesday and rebounding from its Monday’s sell-off. The FOMC interest rate decision led to increased volatility, while post-market earnings reports from META, MSFT, and TSLA fueled some optimism. As a result, expectations are positive ahead of today’s trading session. The S&P 500 is expected to open 0.2% higher.
Investor sentiment worsened, as shown by the yesterday’s AAII Investor Sentiment Survey, which reported that 41.0% of individual investors are bullish, while 34.0% of them are bearish.
The S&P 500 index remained above the 6,000 level, as we can see on the daily chart.
Nasdaq 100 Faces Uncertainty
The Nasdaq 100 declined 0.24% yesterday, moving sideways after its 1.6% rebound on Tuesday. Today, it is expected to open 0.4% higher, driven by the earnings reports. Investors are also waiting for AAPL and INTC earnings after today’s session. Resistance remains around 21,500, while support is at 20,800-21,000.
VIX Moves Sideways
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. On Wednesday, the VIX remained flat despite Fed-related volatility and earnings releases.
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: Uncertainty Following Fed, Earnings
This morning, the S&P 500 futures contract is trading below the 6,100 level again. The market continues its consolidation after rebounding from Monday’s low. Support remains around 5,950-6,000, while resistance is at 6,100-6,120.
Conclusion
Stocks are set to open higher today, reacting to earnings reports from major tech companies. Investors are eagerly awaiting AAPL’s earnings release after today’s session. However, the market may continue trading sideways following Monday’s sell-off and Tuesday’s rebound.
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 faces increased uncertainty despite Tuesday’s rebound.
- The stock market is still 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