Rally continues as market nears key resistance

The S&P 500 extends gains, breaking the 5,900 level - will the momentum sustain?

The S&P 500 gained 0.41% on Thursday, as investor sentiment remained bullish on trade talks, Middle East investments in the U.S., and a potential peace deal in Ukraine. The index is now testing the key resistance zone of 5,900-6,000, nearing its record high from February (6,147.43).

The market is expected to open 0.4% higher today, further extending these advances. However, investors should be cautious as I think that the market may be getting overbought in the short term, which could lead to a downward correction or consolidation. All eyes will be on the Michigan Sentiment data release at 10:00 a.m.

Investor sentiment has improved, as reflected in the Wednesday’s AAII Investor Sentiment Survey, which reported that 35.9% of individual investors are bullish, while 44.4% are bearish.

The S&P 500 index is now approaching the important 6,000 level, extending its rally. This appears to be a continuation of the strong uptrend that began in April.

Nasdaq 100 nears 21,500

The tech-heavy Nasdaq approached the 21,500 level yesterday before pulling back, ultimately closing just 0.08% higher - basically moving sideways in a consolidation. Today, it is expected to open 0.5% higher, likely re-testing the 21,500 resistance level. This comes despite a 5% drop in Applied Materials (AMAT) stock in pre-market trading following its earnings release yesterday.

VIX showing continued investor confidence

The volatility index has been trending lower as stocks extend their gains, indicating less fear in the market. However, investors should remember that the lower the VIX goes, the higher the probability of a potential market reversal.

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. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.

S&P 500 futures contract: Trading along recent highs

This morning, the S&P 500 futures contract is trading higher, indicating a positive open with futures up about 0.4% in premarket trading.

Support is currently near the 5,870 level, marked by the recent consolidation. The futures are showing continued strength following Thursday's gains, though traders should be cautious of potential profit-taking after the rally this week.

Conclusion

The S&P 500 is set to open higher today, extending its recent rally as traders await the Michigan Sentiment data. The bullish momentum continues, supported by positive developments in trade relations and improved economic outlooks.

Here’s the breakdown

• S&P 500 gained 0.41% on Thursday and is testing key resistance of 5,900-6,000.
• The S&P 500 reached its highest level since March 3, breaching the 5,900 level and extending gains for those who bought based on my Volatility Breakout System.
• Futures point to a 0.4% higher open, suggesting continued bullish momentum.

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