As the closing bell rang on Thursday, stocks took a nosedive, ending 0.74% lower after hitting a new record peak of 4,341.88 earlier in the session. What began as a celebratory rally spurred by NVIDIA’s (NASDAQ:) earnings report on Wednesday turned into a bearish retreat, leaving many investors in a tizzy. However, against this backdrop of general decline, NVDA managed to buck the trend, soaring over 9% amidst the market sell-off.
The burning question on everyone’s mind: Is this the start of a bearish turnaround or merely a case of swift profit-taking? Current indications suggest a slight uptick of 0.3% at today’s opening, but the air of uncertainty looms large, hinting at a prolonged consolidation phase.
Investor sentiment needle veered towards optimism, per the AAII Investor Sentiment Survey released on Wednesday, with 47.0% of individual investors adopting bullish positions, a stark contrast to the 26.3% expressing bearish sentiments. The AAII sentiment, a contrarian metric, often serves as a litmus test for market mood, with excessively bullish readings hinting at impending complacency and a dearth of caution. Conversely, a surge in bearish readings could forecast an impending market upswing.
The rupture of the S&P 500’s upward trend line in the previous session, as evidenced by the daily chart, painted a somber picture of the market’s trajectory.
Nasdaq 100: Riding the Volatility Wave
The technology-focused Nasdaq 100 surged to a fresh all-time high of 18,907.54 on the preceding day before backpedaling to close 0.44% lower. This current downtrend appears more in the realm of a short-lived correction post a recent ebullient surge. Projections for today suggest a modest 0.2% uptick for the Nasdaq 100.
VIX: Fear Factor Fluctuations
The Volatility Index, fondly dubbed the fear gauge, which tracks option prices, experienced a rollercoaster ride recently. Pulling back from 21.4 to a low of 11.52, the VIX’s seesaw reflects the seesaw of market emotions. As it rebounded to around 13.40 post hitting a multi-year low, the market sentiments shifted dramatically, signaling a mix of fear and uncertainty that clouded the horizon.
Traditionally, a declining VIX spells euphoria in the market waters, while an upward trajectory typically heralds impending storms in the stock markets. However, as the VIX dwindles, the specter of a market topple looms ever larger.
NVDA: A Lone Warrior in Choppy Seas
Yesterday was a day of highs and lows for NVDA, as the stock catapulted to a record $1,063.2, ending 9.32% higher. The stock’s journey, albeit promising, experienced a significant retracement post its intraday peak. Today’s projected 1.0% opening surge teases us with hope, but deep down, the question nags: Could this be the calm before the profit-taking storm? Hovering below the $1,000 mark, NVDA’s movements could potentially trigger a market-wide correction.
Futures Contract Phasing Through Peaks and Valleys
A glance at the hourly chart of the S&P 500 futures contract showcases a storyline of highs and lows. After recoiling from a record high around 5,368, a nearly 100-point plunge was witnessed, only to be followed by a morning uptick promising a ray of sunshine. At present, it resembles an intraday climb, with resistance pegged at 5,300 and support zones flanking 5,260-5,280.
Outlook: Navigating Turbulent Terrain
As the S&P 500 index prepares for a marginally positive start today, it seems to be a bounce-back from the preceding day’s downturn. However, a sense of unpredictability could shroud the market as we edge closer to the long holiday weekend.
Recalling sentiments shared just yesterday:
“No confirmed negative signals are evident as investor sentiment remains elevated. However, that overly bullish sentiment, coupled with low VIX readings, may be worrying for stocks in the short term. Some profit-taking may be on the horizon.”
Thursday’s trading session subtly nodded towards profit-taking behaviors, with NVDA emerging as a lone bright spot amidst a broader gloom in the stock market landscape.
Echoing insights from the May Stock Price Forecast:
“Where will the market go in May? There’s a popular saying: ‘Sell in May and go away,’ but statistics don’t consistently support such clear seasonal patterns or cycles. The safe bet for May is likely sideways trading, with investors digesting recent data suggesting that inflation may not be transitory, and the Fed could maintain its relatively tight monetary policy. However, economic data isn’t entirely negative, and strong earnings from companies may continue to fuel the bull market.”
My stance on the short-term outlook remains cautiously neutral for now.
The market narrative unfolds as follows:
- The S&P 500 recoiled from its record pinnacle yesterday, leaving us to ponder whether it’s a downturn in the making or merely a hasty retreat.
- Friday the 19th witnessed stock prices plumbing depths unseen since February, delineating a correction in the medium-term uptrend. Last week, the S&P 500 retraced its mid-April tumble, cresting new highs beyond the 5,300 mark.
- A neutral stance characterizes my short-term outlook amid the ebb and flow of market dynamics.
