Will stock prices retrace their recent gains after the inflation data?
Stock prices remained little changed on Tuesday, with the S&P 500 index closing just 0.03% higher than Monday. The market continued to move sideways despite Fed Chair Powell’s testimony. Today, the market opened lower following the release of the Consumer Price Index (CPI) report, which came in higher than expected at +0.5% month-over-month. S&P 500 Futures were trading 1.0% lower, indicating a sharp drop at the open.
Investor sentiment has recently worsened, as shown by last Wednesday’s AAII Investor Sentiment Survey, which reported that 33.3% of individual investors are bullish, while 42.9% of them are bearish.
The S&P 500 index continues to trade below the 6,100 level, as we can see on the daily chart.
Nasdaq 100 Keeps Fluctuating
The Nasdaq 100 declined by 0.29% on Tuesday, extending its short-term consolidation below resistance at 21,800–22,000. Support remains at around 21,500, marked by last Friday’s low.
Today, the Nasdaq 100 also opened lower, suggesting further consolidation.
VIX Remained Near 16
The VIX index, a measure of market volatility, rebounded from 15 last Friday, reaching 16.66. It continues to fluctuate with local highs above 20 on January 27 and February 3, still indicating a lack of fear in the market.
Historically, a dropping VIX indicates less fear in the market, and a rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market’s downward reversal. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.
S&P 500 Futures Contract: Lower After CPI Data
This morning, the S&P 500 futures contract is pulling back from the 6,100 level following the consumer inflation report.
Resistance remains around 6,100-6,120, while support is now around 6,000-6,020.
Conclusion
Stocks are set to open significantly lower following today’s CPI data. No confirmed negative signals have emerged, but stocks continue to fluctuate following the post-election rally.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- The S&P 500 is likely to pull back after the CPI report.
- The stock market is still seeing increased volatility following the post-election rally.
- In my opinion, the short-term outlook is neutral.