August 27, 2024 (Investorideas.com Newswire) Shares prolonged their short-term consolidation on Monday, with the S&P 500 index closing 0.32% decrease after reaching a brand new native excessive of 5,651.62. This was simply 18 factors under the July 16 file excessive of 5,669.6. The Dow Jones Industrial Common even reached a brand new file excessive yesterday! It closed simply 0.16% greater, although. The query stays: is that this the start of a brand new leg of the uptrend, making new information for the S&P 500 inevitable, or is it only a retracement of current declines, signaling a possible medium-term consolidation following record-breaking advances earlier this yr?
This morning, the S&P 500 index is prone to open 0.1% decrease, extending its consolidation amid financial knowledge uncertainty, geopolitical worries, and the upcoming NVDA earnings launch tomorrow.
Final Wednesday, I wrote “Just lately, the market has continued to climb following the transient Yen disaster in the beginning of August, stunning many merchants. The query is whether or not the market will proceed to new highs or reverse course and retrace the current rally. I feel there’s a likelihood the market will reverse its course and proper among the advances, retracing a big a part of the rally.”
I opened a speculative brief place final Tuesday, August 20.
Investor sentiment improved considerably final week, as proven by Wednesday’s AAII Investor Sentiment Survey, which confirmed that 51.6% of particular person buyers are bullish, whereas solely 23.7% of them are bearish – down from 28.9% final week.
The S&P 500 index additional prolonged its short-term consolidation yesterday, as we will see on the every day chart.
Nasdaq 100 Stays Comparatively Weaker
The technology-focused Nasdaq 100 approached the 20,000 degree final week. On Friday, it recovered a few of Thursday’s losses, and yesterday, it got here again down, retesting Thursday’s native low of round 19,450.
The resistance degree stays round 20,000, marked by the July 17 every day hole down of 20,080.27 to twenty,266.51, amongst others. At this time, the Nasdaq 100 is prone to open 0.2% decrease.
VIX Is Nonetheless Near 16
On the earlier Monday, the VIX index, a measure of market worry, reached a brand new long-term excessive of 65.73 – the very best degree for the reason that 2008 monetary disaster and the COVID sell-off in 2020. This mirrored important worry available in the market.
Final Monday, it traded as little as 14.46 following a rebound in inventory costs. Since then, the VIX has been rising once more, reaching a excessive of 18.06 on Thursday. Yesterday, it remained near 16, indicating no change in volatility.
Traditionally, a dropping VIX signifies much less worry available in the market, and rising VIX accompanies inventory market downturns. Nonetheless, the decrease the VIX, the upper the likelihood of the market’s downward reversal. Conversely, the upper the VIX, the upper the likelihood of the market’s upward reversal.
Futures Contract Extending a Consolidation
Let’s check out the hourly chart of the S&P 500 futures contract. This morning, it is buying and selling sideways, remaining above the 5,600 degree. Then again, the resistance degree is at 5,660-5,670, marked by native highs. It nonetheless seems to be in a short-term consolidation, probably forming a topping sample.
A lot will rely upon the NVDA quarterly earnings tomorrow, which will probably be launched after the session closes. Buyers are additionally awaiting the necessary CB Shopper Confidence quantity at this time at 10:00 a.m.
As I wrote final Wednesday, “The market appears to be heading towards new file highs however is changing into more and more overbought and prone to a short-term correction. The current volatility suggests a possible shift within the long-term outlook, and the market could also be getting into a medium-term consolidation.”
Conclusion
The S&P 500 is prone to open barely decrease this morning. The market could additional lengthen its consolidation following the current rally, and it nonetheless seems to be like a topping sample earlier than a downward correction. Buyers are ready for the CB Shopper Confidence knowledge at 10:00 a.m. and the NVDA launch tomorrow.
I opened a speculative brief place within the S&P 500 futures contract final Tuesday, August 20.
For now, my short-term outlook stays bearish.
Here is the breakdown:
- The S&P 500 index continued sideways yesterday; NVDA earnings are in focus.
- The market should be forming a topping sample.
- For my part, the short-term outlook is bearish, and a speculative brief place is justified from the chance/reward perspective.
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