S&P 500 Approaching 5,200. Bull Market New Leg? Beware of Gains Retrace
S&P 500 continue to extend its advances, though closing at a modest 0,13% On Tuesday (07 May 2024). We have seen stocks extending their advances. This makes me wonder is this a new trend or merely ongoing consolidation?
Monday (06 May)’s trading session was bullish, with the S&P 500 index gaining 1.03% and closing at the highest since 11 April. Last Friday (03 May), the index gained 1.3% following a 0.9% advance on Thursday (02 May 2024). So why did stock prices advance?
Investor Sentiment Remained Positive
Following a series of quarterly earnings releases last week and less inflationary economic data, possibly signaling Fed monetary policy easing, investor sentiment remain positive.
On 19 April (Friday), the index hit 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. However, stock prices rebounded as Middle East tensions eased, shifting investor focus to quarterly earnings releases.
On Tuesday morning, we saw stocks open virtually flat, as the S&P 500 futures contract hovers around yesterday's closing price. The market may see a short-term consolidation following recent gains.
The investor sentiment improved last week, as indicated by the Wednesday’s AAII Investor Sentiment Survey, which showed that 38.5% of individual investors are bullish, while 32.5% of them are bearish. 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 even more of its mid-April sell-off yesterday, as we can see on the daily chart.
Nasdaq 100 Went Slightly Above 18,000
The technology-focused Nasdaq 100 index fell by 0.01% after it gained 1.13% on Monday, extending its Thursday’s and Friday’s advances and breaking above the 18,000 level. However, it approached a potential resistance, marked by the previous local highs along the 18,200-18,400 level.
On Friday, the market rallied after the earnings release from AAPL. This morning, the Nasdaq 100 went down lower by 0.01%
VIX Remains Below 14
The 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 yesterday, it was as low as 13.23, 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.
Summary
The recent sessions were bullish, with the S&P 500 index extending its rebound towards the 5,200 level.
On Tuesday (07 May), we saw that market have retract some gains, and I expect today (08 May 2024), the market may pause or even retrace some gains.
With most of the earnings season over (there is only one very important release left - $NVIDIA Corp(NVDA)$ on May 22) and the FOMC Rate Decision release behind us, expect a period of uncertainty.
Appreciate if you could share your thoughts in the comment section whether you think we would see a market pause or retracing some more gains?
@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.
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We have seen companies with earnings report that crush estimates and even give higher estimated revenue forecast but the market has dismissed it as lighter or weaker than expected. Stocks slide 10% or more after earnings report. So this is a clear sign that prices is at the peak now and there is no room upwards for now.
There is an ongoing play in cyclical an staple stocks an banks seem on the verge to breakout. Nevertheless, l believe this to be the last stretch of this rally from April pullback as Dow clocks the best winning streak this year.
The markets will at best hit a double top formation for Nasdaq and S&P 500 before the 10%-20% correction set in this month. I believe it might not even have enough strength to test the ATH. Time to go short guys! GL!
The market may fluctuate a little bit but I believe it will go up in general
Smart money is accumulating. We know a huge buyback is coming soon.
Every dip gets bought within 1 minute do you understand this lol