Will stocks continue their uptrend? Or is this just another leg up within a consolidation?Stocks were advancing on Friday, fueled by the Thursday’s earnings release from AAPL and the monthly jobs data that was released before the session opened. The S&P 500 index gained 1.26% following a 0.9% advance on Thursday. The market was the highest since April as the index went back above the 5,100 level.On Friday, 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. Recently, stock prices rebounded as tensions in the Middle East eased, and investors shifted their focus to quarterly earnings releases.This morning, the futures contract is gaining 0.4%, with the S&P 500 likely to open higher and extend its late last week’s advances as the sentiment remains positive. “The question arises: Is this merely a correction or the beginning of a more significant downtrend? It’s difficult to determine at this point. Last month, hopes for a Fed pivot were dashed as new data reignited inflation fears, and geopolitical tensions added further uncertainty. However, as of today, it appears the market is only correcting a rally that began in November.”The investor sentiment improved last week, as indicated by the Wednesday’s 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.The S&P 500 retraced some more of its mid-April sell-off on Friday, as we can see on the .(Click on image to enlarge)
S&P 500 Gained 0.55% Last WeekCompared to the previous Friday’s closing price, the index gained 0.55%, slightly extending its previous week’s rebound of 2.7%. “Short-term consolidation near the new records may suggest that the market is potentially topping out, though no clearly negative signals are evident yet.” Indeed, the market topped out, breaking below its upward trend line, and accelerated a short-term downtrend. It’s worth noticing that last week, the index bounced from a support level of around 5,000 again, as we can see on the weekly chart.(Click on image to enlarge)
Nasdaq 100 – Closer to 18,000The technology-focused Nasdaq 100 index extended its Thursday’s gain of 1.3% on Friday, closing 1.99% higher. The market rallied after the earnings release from AAPL. It’s getting close to the resistance level of 18,000 again. This morning, the Nasdaq 100 is expected to open 0.4% higher.(Click on image to enlarge)
VIX Is Below 14The VIX index, 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 on Friday it was as low as 13.48, showing more 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.(Click on image to enlarge)
Futures Contract Extends AdvancesLet’s take a look at the hourly chart of the futures contract. This morning, it is breaking above the 5,150 level, reaching a local high of around 5,177. The next resistance level is at 5,200-5,220, marked by the early April fluctuations. The support level is at 5,140-5,150, among others.(Click on image to enlarge)
Conclusion
Last week, the S&P 500 index bounced from the 5,000 level again, reaching a local high of around 5,140 on Friday. This morning, the market is likely to extend the advance. However, it could face some resistance as it gets near the 5,150 level, a key level marking previous local lows.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. “While earnings reports offer cause for cautious optimism, it remains uncertain whether last week’s gains signify a true upward reversal or simply a correction of recent declines.” The pullback in stock prices brought even more uncertainty, with both bullish and bearish scenarios seeming likely depending on market reactions to data and earnings. “Where will the market go in May? There’s a popular saying: ‘Sell in May and go away,’ but statistics don’t consistently support such clear seasonal patterns or cycles. 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. However, economic data isn’t entirely negative, and strong earnings from companies may continue to fuel the bull market.”For now, my short-term outlook remains neutral.Here’s the breakdown:
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 Stocks Trading Alerts are also a part of our 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. Stocks: Is “Selling in May and Going Away” Justified?Stocks Treading Water Amid Uncertainty Over Fed And EarningsStocks To Extend Rebound Before Fed, Earnings?
