Stocks continued their short-term downtrend on Friday, closing 1.73% lower after hitting a local low of 5,402.62. The market reacted to lower-than-expected monthly jobs data, causing some jitters among investors.
However, this morning, the index is set to open 0.6% higher, driven by improving investor sentiment ahead of the crucial CPI data release on Wednesday and the upcoming FOMC Rate Decision next week.
My speculative short position in the contract from August 20 has become more profitable as the market sees increased volatility.
Despite recent declines, investor sentiment remains relatively high, as indicated by the latest AAII Investor Sentiment Survey. The survey showed that 45.3% of individual investors are bullish, while 24.9% are bearish, a slight decrease from last week.
The S&P 500 index retraced more of its August rebound on Friday, as illustrated in the daily chart.
S&P 500 Selling Off by Over 4% Last Week
Compared to the previous Friday’s closing price, the S&P 500 lost 4.25% last week, forming a topping pattern just below its mid-July record high. While a short-term downward correction may be nearing, the medium-term outlook remains bullish.
Nasdaq 100 Extended its Sell-Off
The Nasdaq 100, a technology-focused index, lost 2.69% on Friday, accelerating its short-term downtrend. It fell below the 18,500 level, retracing more than half of its August rebound. However, it is expected to rebound slightly today after Friday’s significant drop.
VIX: Above 22
The VIX, a measure of market fear, reached a local high of 23.76 on Friday, indicating elevated fear among investors. Historically, a rising VIX accompanies stock market downturns, while a dropping VIX suggests less fear. Currently, the VIX remains high, signaling potential market volatility.
Futures Contract: Change of Trend or Just Rebound?
Looking at the hourly chart of the S&P 500 futures contract, we see a brief dip below the 5,400 level on Friday. The market is now rebounding, but it may encounter resistance around 5,480–5,500. Support remains at 5,400.
Analysis and Conclusion
The recent market movements indicate a short-term correction rather than a complete reversal. The upcoming CPI data and FOMC Rate Decision will be crucial in determining the market direction. For now, the outlook remains neutral, with investors eagerly awaiting key data releases.
Here’s the breakdown:
- The market dipped to around 5,400 on Friday, signaling a potential consolidation phase.
- Investors are focused on the CPI data release and the FOMC Rate Decision.
In conclusion, the market is in a period of uncertainty, and investors should stay informed and cautious in their decision-making.