Will Stocks Get Record Highs As S&P 500 Close In To Late March Record?
On Friday, we saw the stock market extended their short-term uptrend with $S&P 500 Index(.SPX.US$ breaking above the 5,200 level and gain a modest 0.16%. The stocks extended their uptrend following Thursday short-term uptrend.
The stock market is getting closer to the late March record high which was catalysed by a weaker U.S. dollar and global stock indices also advances. Now question is whether will S&P 500 continue its long-term uptrend?
On April 19, the index hit a new medium-term low of 4,953.56. This marked its lowest level since late February, with a decline of over 311 points or 5.9% from the record high of 5,264.85 on February 28. However, stock prices rebounded as Middle East tensions eased, shifting investor focus to quarterly earnings releases.
In April, hopes for a Fed pivot were dashed as new data reignited inflation fears, and geopolitical tensions added further uncertainty. But we saw on Friday (10 May) that it appeared that the market is only correcting a rally that began in November.
Last week, the investor sentiment has clearly improved as indicated by the 08 May 2024 (Wednesday) AAII Investor Sentiment Survey, which showed that 40.8% of individual investors are bullish, while only 23.8% of them are bearish, down from 32.5% last week.
The AAII sentiment is a contrary indicator in the sense that highly bullish readings may suggest excessive complacency and a lack of fear in the market. Conversely, bearish readings are favorable for market upturns.
From the daily chart new, we could see that S&P 500 approaching a potential resistance level marked by its trading range from March and April.
We could see this pattern at least till the 3rd week of May 2024.
NASDAQ Failed To Break Its Trading Range
Last Monday, we saw the technology-focused $NASDAQ 100 Index(.NDX.US$ accelerated higher, but since then, it has been trading sideways after reaching a local high of around 18,150 on Tuesday. Today, the tech stocks gauge is likely to open higher 0.4%, resuming the uptrend and catching up with the broad stock market.
VIX Broke Below 13
The $CBOE Volatility S&P 500 Index(.VIX.US$ , also known as the fear gauge, is derived from option prices. In late March, it was trading around the 13 level. However, market volatility has led to an increase in the VIX, and on previous Friday, it reached a high of 21.4 - the highest since late October, signaling fear in the market. Recently it went lower again, and yesterday, it was as low as 12.68, showing a growing complacency in the market.
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.
Futures Contract Might Extend the Advance
On Monday (13 May 2024), the S&P 500 futures contract might be trading 0.3% higher, indicating a higher opening for the index, which may get even closer to the all-time high level.
Summary
The S&P 500 is likely to continue its uptrend on Monday (13 May 2024). However, the market may see a correction at some point as it neared the resistance area marked by local highs from March and April.
In the first half of April, the S&P 500 was continuing a correction from the March 28 record high of 5,264.85 on Middle East tensions, strong U.S. dollar. Recently, it sold off below the important 5,000 level, and last week, it kept retracing the declines as earnings and economic data lifted the sentiment again.
The uncertainty seems to be gone, but the overall bullish sentiment may be worrying for the market in the short-term. A correction may be on the horizon.
The safe bet for May is likely sideways trading, with investors digesting recent data suggesting that inflation may not be transitory, and the Fed could maintain its relatively tight monetary policy.
I personally feel that the short-term outlook is neutral as I would be still going defensive as there is still some economic data which might get the Fed to maintain its relatively tight monetary policy.
Appreciate if you could share your thoughts in the comment section whether you think short-term outlook would see some short rally?
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Use A.I. to pick stocks.
Find me in YouTube handle nerdbull1669
743Followers
222Following
1619Visitors
Follow