Monday marked one other day of positive factors for shares, with the rising 0.97% and retracing extra of its sell-off from July to early August. The market continues to climb following the temporary disaster firstly of August, stunning many merchants. The query now’s whether or not the market will proceed to new highs or reverse course and retrace the current rally. For now, there are not any confirmed unfavorable indicators, and counsel a probable flat open this morning.
Though there have been no confirmed unfavorable indicators, I made a decision to open a speculative brief place on the opening of at this time’s money market session.
Final Thursday, I wrote “It nonetheless seems to be a correction following a decline that began in mid-July; nonetheless, the market may advance in the direction of a double-top or new highs.” This stays correct as we might see a medium-term consolidation following early August volatility.
Investor sentiment improved, as indicated by final Wednesday’s AAII Investor Sentiment Survey, which confirmed that 42.5% of particular person traders are bullish, whereas 28.9% of them are bearish – down from 37.5% final week.
The S&P 500 index broke above its August 1 native excessive on Monday, as we are able to see on the each day chart.
Nasdaq 100 Approaching 20,000 Degree Once more
The technology-focused gained 1.32% on Monday, reaching a neighborhood excessive of 19,767.43. It has continued to advance, following the broader inventory market, though it stays comparatively weaker after the early August sell-off. The index is pushed increased by a couple of key shares, together with NVDA, which rallied by over 40% from its low level. That is vital given its multi-trillion-dollar market cap.
This morning, the Nasdaq 100 is prone to open 0.1% increased. The resistance stage is round 20,000, marked by the July 17 each day hole down of 20,080.27 to twenty,266.51, amongst others.
VIX Stays Shut to fifteen
Final Monday, the , a measure of market worry, reached a brand new long-term excessive of 65.73 – the very best stage for the reason that 2008 monetary disaster and the COVID sell-off in 2020. This mirrored vital worry out there. Nevertheless, it has since been retracing, dropping as little as 14.46 yesterday, indicating a lot much less worry. The VIX has returned to ‘regular’ ranges, contemplating the previous few months.
Traditionally, a dropping VIX signifies much less worry out there, and rising VIX accompanies inventory market downturns. Nevertheless, the decrease the VIX, the upper the chance of the market’s downward reversal. Conversely, the upper the VIX, the upper the chance of the market’s upward reversal.
Futures Contract Broke Above 5,600
Let’s check out the hourly chart of the S&P 500 futures contract. Yesterday, it broke above the 5,600 stage, accelerating its uptrend as soon as once more. The market appears to be heading towards new report highs however is changing into more and more overbought and vulnerable 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
In my Inventory Value Forecast for August, I famous “a pointy reversal occurred, and by the tip of the month, the S&P 500 skilled vital volatility following the sell-off. August is starting on a really bearish observe, however the market might discover a native backside sooner or later.”
The rebound from the earlier Monday’s low has been vital, and bulls have regained management of the market.
On Friday, I questioned:
“Will this result in new report highs? For now, it nonetheless looks like a correction throughout the downtrend. Nevertheless, if the market breaks above its early August native excessive, the street to re-test the all-time excessive can be open.”
The S&P 500 broke above its August excessive, which can be a bullish signal, however within the brief time period, there’s an rising chance that the market will attain a high quickly. This morning, the market is prone to open flat, presumably resulting in a sideways buying and selling session.
On the earlier Friday, I wrote “(…) rebound introduced some hope for bulls, however it appears they don’t seem to be out of the woods but. The current sell-off was vital, and it’ll possible take extra time to recuperate.
There may be additionally an opportunity that the present advances are merely an upward correction, and the market might revisit its lows sooner or later.”
For now, my short-term outlook is bearish.
Right here’s the breakdown:
The S&P 500 index accelerated its short-term uptrend as soon as once more, nearing its all-time excessive from July.
At this time, the market is prone to open flat, however a correction could also be looming.
In my view, the short-term outlook is bearish.
