Will the S&P 500 extend its record-breaking rally?
Stocks further extended their advances yesterday, with the S&P 500 index reaching a new record high of 6,100.81 and closing 0.61% higher. The optimism was driven by the earnings release from NFLX and the announcement of U.S. government investments in AI infrastructure, which is expected to boost gains in NVDA, among others.
Today, the S&P 500 futures contract trades 0.1% lower, and the S&P 500 is likely to pause its uptrend and fluctuate along the 6,100 resistance level.
Investor sentiment has significantly improved, as shown by yesterday’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 reached its previous high from the early December, as we can see on the daily chart.
Nasdaq 100 Nears 22,000 Level
The Nasdaq 100 gained 1.33% yesterday, after reaching a local high of 21,943.04. It neared the key 22,000 level and its December 16 record high of 22,133.22. Some major stocks, including AAPL and TSLA, remained relatively weak, but advances in NFLX and NVDA fueled the whole sector. Potential resistance remains at 22,000–22,100. Today, the Nasdaq 100 is expected to open 0.5% lower.
VIX Remains Around 15
On December 18, the VIX index, a measure of market volatility, surged to 28.32, its highest level since early August. After dropping below 15 in late December, the VIX rose again, and last Monday, it reached a high of 22.04.
Yesterday, it dipped to a low of 14.59, erasing more its early January gains amid bullish sentiment in the stock 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. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.
S&P 500 Futures Contract Trading Above 6,100
This morning, the S&P 500 futures contract continues to trade above the 6,100 level. Resistance is now near 6,150, while support is around 6,080, among others.
For now, the market continues to extend its consolidation, though it appears increasingly likely to retest its record highs.
Conclusion
Thursday’s trading session is set to bring some uncertainty to the stock market. The S&P 500 index is likely to fluctuate following its recent rally. Yesterday, it marginally breached its early December record high, marking a potential resistance around the 6,100 level. Overall, the market may face profit-taking at some point.
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 is likely to fluctuate following its recent rally.
- 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