Stock prices experienced turmoil in the recent session, closing 0.50% lower, continuing a trend of short-term consolidation amidst recent setbacks. The index teetered close to last week’s low of 5,390.95 before finding support near the 5,400 level. The market sentiment today shows signs of improvement, forecasting a 1.0% uptick in the index, recouping losses from the previous session.
“Is the market sketching a bottom pattern? It could be the case, but with the prevailing downtrend, the recent fluctuations might just signify a pause before another downward spiral. We eagerly anticipate crucial earnings updates next week and the pivotal FOMC Rate Decision set for Wednesday.”
Today, Meta (NASDAQ:) is on schedule to divulge its earnings, amplifying expectations for Amazon (NASDAQ:) and Apple (NASDAQ:) reports due tomorrow, potentially swaying market sentiment. The FOMC announcement expected today is poised to evoke peaks of volatility.
My calculated bearish stance in the S&P 500, initiated on July 9, continues to yield profits.
The current tone among investors has skewed pessimistic, evidenced by the most recent AAII Investor Sentiment Survey reported on Wednesday, where 43.2% of retail investors lean bullish and 31.7% incline towards the bearish side – marking an increase from 23.4% recorded the previous week.
As elaborated in my July stock forecast,
“While further advances remain plausible, the potential for a deeper pullback looms larger. Presently, no explicit negative signals are evident, but the considerable May gain of 4.8% and June surge of 3.5% suggest a more cautious trajectory for July (…) The market anticipates the upcoming quarterly earnings period in the latter half of the month. Additionally, a slew of economic indicators plan to unveil, such as the CPI release on July 11, the Advance GDP revelation on July 25, and the FOMC Rate Decision on July 31.”
The S&P 500 index persists in a consolidation phase above the 5,400 benchmark, as observed on the daily chart.
Nasdaq 100 Plunges to a New Local Low
The technology-centric index retracted by 1.38% yesterday, nosediving to a fresh local low of 18,667.22. It sustained relative weakness compared to the overall equities market. However, this morning, the Nasdaq 100 paves the way for a 1.5% morning leap prior to the Fed’s announcement and META’s earnings release later today.
VIX Indicates Lingering Market Unease
The , which gauges market trepidation, has fluctuated within the 12-13 band since May. Last Thursday, it spiked to 19.36 following recent upswings, driven by the equity downturn. It rallied above 18 yesterday after tapering to 16.0-16.5, signaling a persisting state of market uncertainty.
Historically, a receding VIX points to diminished market anxiety, whereas an ascending VIX aligns with stock market downtrends. Nevertheless, a lower VIX augurs a higher likelihood of a market reversal towards decline. Conversely, a spiked VIX hints at an uptick in the market’s potential for a turnaround.
Futures Contract Challenges Recent Highs Once More
Directing our attention to the hourly outlook of the contract. The market encounters turbulence amid the recent downtrend. Yesterday, it descended to 5,433, and today, it hovers near recent peaks in the vicinity of 5,530. The resistance threshold lies at 5,550, while support levels range between 5,480-5,500.
In Summary
Last Friday, I remarked:
“The recent sell-off this week triggers pondering: Was this a mere correction or the inception of a downtrend? Historical patterns suggest the lows typically form in October, but the future seldom echoes the past. For now, a prevailing downtrend looms, with a probable brief upsurge in the offing.”
The earnings season is in full swing, with the impending FOMC release today. Yesterday, I speculated “the disclosures are likely to spur turbulence and potentially a buying frenzy for equities.” This assertion rings true as optimism reigns supreme this morning.
My speculative shorting of the S&P 500 futures contract initiated on July 9 continues to yield profits.
At present, my near-term forecast remains pessimistic.
Here’s the breakdown:
- The S&P 500 index grapples with heightened volatility following a recent market dip.
- Market participants await pivotal quarterly earnings reports from tech giants this week, in addition to tomorrow’s FOMC release, among others.
- In my view, the short-term perspective leans bearish.