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Inventory costs barely prolonged their uptrend on Friday, however the index closed simply 0.08% larger regardless of latest inflation knowledge that indicated chance of easing financial coverage within the coming months. Nevertheless, the market reached a brand new medium-term excessive of 4,802.40, earlier than retracing among the advance. As talked about on December 21, “the probably state of affairs is a consolidation alongside 4,700-4800”, and regardless of the latest dip beneath 4,700, this prediction stays correct.
On Thursday and Friday, the market continued to rebound from the resistance degree of 4,800, and at the moment it appears to be like prefer it’s going to additional prolong a consolidation following November-December rally. How can we capitalize on such buying and selling motion? It’s higher to shorten the timeframe of the trades and search for shopping for alternatives at help ranges and promoting at resistance ranges.
In late December and early January, the S&P 500 offered off, reaching its lowest level on Friday since December 13 – the day that marked a pivotal shift within the Fed’s financial coverage, and on Friday, the reached a brand new yearly excessive, getting nearer to the January 4, 2022, all-time excessive of 4,818.62 once more.
Investor sentiment stays bullish; Final Wednesday’s AAII Investor Sentiment Survey confirmed that also, 48.6% of particular person traders stay bullish. The AAII sentiment is a opposite indicator within the sense that extremely bullish readings could recommend extreme complacency and an absence of concern available in the market. Conversely, bearish readings are favorable for market upturns.
This morning, the contract is buying and selling 0.2% decrease. Yesterday it misplaced 0.1% amid low exercise throughout the lengthy vacation weekend within the U.S. Consequently, the S&P 500 will probably open round 0.3% decrease this morning, doubtlessly extending a short-term consolidation beneath the 4,800 degree. Earlier than the opening of right this moment’s buying and selling session we have seen some typically better-than-expected earnings from the most important banks. The market might be awaiting extra quarterly company earnings bulletins.
The market may even see extra consolidation following November-December rally, as we are able to see on the every day chart.
Nasdaq Went Sideways Too
Not too long ago, the technology-focused was extending its uptrend, reaching a brand new all-time excessive of 16,969.17 on Thursday, December 28. On December 29, I wrote, “Whereas it continues to commerce above its month-long uptrend line, there are, nevertheless, short-term overbought situations which will result in a downward correction in some unspecified time in the future.” Certainly, the market skilled a pointy sell-off then.
Final week on Monday, it bounced sharply, and later it continued the advance. On Wednesday, the Nasdaq 100 closed above the final Tuesday’s every day hole down of 16,687-16,758, which was a optimistic sign, and on Friday, it went as excessive as 16,900. Nevertheless, the query of whether or not it’ll break the 17,000 mark stays open.
VIX Stays Near Earlier Lows
The , also called the concern gauge, is derived from choice costs. Every week in the past, it bounced down from the earlier highs across the 14.0-14.5 degree, which was a optimistic sign. Final week, the VIX continued downwards following as inventory costs prolonged their positive aspects. Traditionally, a dropping VIX signifies much less concern available in the market, and rising VIX accompanies inventory market downturns. Nevertheless, the decrease the VIX, the upper the chance of the market’s downward reversal.
Futures Contract Stays Near 4,800
Let’s check out the hourly chart of the S&P 500 futures contract. On Friday, it approached its earlier excessive of round 4,840 once more. Nevertheless, this degree nonetheless stood because the essential short-term resistance. At this time, the market is buying and selling alongside the 4,800 degree once more. The help degree can also be at 4,780.
Conclusion
Shares will probably open barely decrease this morning, however the S&P 500 could additional prolong a consolidation beneath the 4,800 degree. It’s unsure whether or not the market will resume its medium-term uptrend or just proceed buying and selling inside a consolidation following November-December rally. Buyers might be awaiting extra quarterly company earnings releases.
On December 21, I discussed that “in a short-term the market may even see some extra uncertainty and volatility”, and certainly, there may be loads of uncertainty following an early-December rally and the breakout of the S&P 500 above the 4,700 degree. There’s nonetheless an opportunity of extending the medium-term uptrend, as no confirmed detrimental alerts have emerged.
For now, my short-term outlook stays impartial.
I feel that no positions are justified from the chance/reward standpoint.
Right here’s the breakdown:
The S&P 500 stays near the 4,800 degree, and it might see extra makes an attempt at reaching its 2022 all-time excessive of 4,818.62.
It nonetheless seems extra like a consolidation than the beginning of a brand new uptrend.
Quick-term uncertainty and volatility could favor buying and selling primarily based on help and resistance ranges.
In my view, the short-term outlook is impartial.
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