Stocks Rebound Sharply, But Is The Worst Over?

The stock market has retraced a large part of last Thursday’s decline - which direction will it move next?

The S&P 500 index gained 2.35% on Monday, rebounding sharply after last Thursday’s sell-off, as investors pushed technology stocks higher despite a decline in Nvidia (NVDA) shares. Today, the index is expected to open 0.5% lower following the release of the Consumer Price Index (CPI) data. The figure came in at +0.4% month over month, higher than expected (+0.3%).

Investor sentiment has deteriorated, as reflected in last Wednesday’s AAII Investor Sentiment Survey, which reported that 34.1% of individual investors are bullish, while 48.4% are bearish.

The S&P 500 index moved back above the 7,500 level yesterday, as shown on the daily chart.

S&P 500 Futures Contract: Rallying Toward 7,600

This morning, the S&P 500 futures contract is trading lower, as the CPI data has caused some volatility.

Resistance is currently around 7,600, while a support is at 7,500, among other levels.

Market Outlook: Back In a Medium-Term Trading Range

The S&P 500 index is likely to open slightly higher following today’s CPI release. However, the market may experience further fluctuations after yesterday’s sharp rally.

Investors will be watching upcoming earnings releases, while elevated market volatility is likely to persist.

Here's what I think is most likely:

• The S&P 500 index rebounded sharply from last Thursday’s low, but further volatility seems likely.

• My Volatility Breakout System is currently long in the market.