S&P 500: New record highs, but caution builds

Stocks continue to reach new highs, but the peak may be near.

The S&P 500 index closed 0.07% higher yesterday, reaching another all-time high of 6,381.31 before pulling back and ending the session nearly flat.

This morning, the index is set to open 0.1% higher, continuing short-term fluctuations. Since last Friday’s close, the market is up about 1%

Investor sentiment has slightly deteriorated again, as reflected in the yesterday’s AAII Investor Sentiment Survey, which reported that 36.8% of individual investors are bullish, while 34.0% are bearish.

The S&P 500 broke above its recent trading range on Thursday, suggesting bullish momentum on the daily chart, but risks of a potential short-term top remain.

Nasdaq 100: New high but signs of exhaustion

The Nasdaq 100 gained 0.25% on Thursday, reaching a new record of 23,268.49, before retreating slightly. It remains above a month-long upward trendline, supported by optimism ahead of next week’s key quarterly earnings releases.

While no strong bearish signals have emerged yet, the recent price action may be forming a potential topping pattern.

Volatility drops again

The VIX (Volatility Index) fell to a new local low of 14.95 yesterday, marking its lowest level since late February - coinciding with stocks hitting new highs. This reflects declining investor fear but also raises the possibility of a short-term market top.

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: Above 6,400

This morning, the S&P 500 futures contract is trading just above 6,400, after pulling back from a high near 6,421.

While there are no clear negative signals, the market remains within a potential topping pattern.

Resistance is now near 6,420-6,430, while support is at 6,370-6,380, among others.

Markets remain highly sensitive to tariff-related news and could stay volatile in the near term.

Crude Oil: Rebounds again amid mixed signals

Oil gained 1.20% on Thursday, bouncing once more from the key $65 support level, driven by optimism around U.S. trade agreements, hopes for more tariff-related developments and declining inventory data. Today, oil is up another 0.5%.

For oil markets specifically, these developments are worth monitoring:

Markets gained on positive trade sentiment, with recent U.S. agreements with Japan and progress toward a deal with the EU helping to boost economic outlook and oil demand. India also signaled optimism in averting U.S. tariffs, contributing to hopes that more trade resolutions are on the horizon before the August 1 deadline.

The U.S. may permit Chevron and other partners to resume limited operations in sanctioned Venezuela, potentially boosting exports by over 200,000 barrels/day, helping ease heavy crude shortages.

Russia plans tighter gasoline export controls to curb domestic fuel price inflation, which could add further pressure to global fuel markets.

Oil rebounds from $65 again

Crude oil continues to trade sideways, holding above the key support level around $65. It’s unclear whether this means a bottoming pattern ahead of a potential rebound, or merely a consolidation following the declines since mid-June, which could lead to a future breakdown.

My short-term outlook on oil remains neutral, and no positions are currently justified from a risk/reward standpoint.

Conclusion

Stocks are expected to open slightly higher, continuing their short-term consolidation near record highs.

Investor sentiment remains elevated ahead of key earnings reports, the FOMC interest rate decision next Wednesday, and tariff-related developments.

The key question remains: Is this a topping pattern, or just a classic case of the market “climbing a wall of worry”?

However, a lack of strong bullish catalysts may limit further upside in the near term.

One of the warning signals that stocks may be approaching at least a short-term top could also be the signal published by Ryan Mitchell in his Seasonal Trading Primer. Someone who opened a position based on this method realized a decent profit yesterday, but the signal also suggests that the market may be nearing the end of its short-term move.

Here’s the breakdown:

• S&P 500 hit a new all-time high, nearing 6,400.
• The rally extended gains for those who bought based on my Volatility Breakout System.
• There are no clear bearish signals yet, but a deeper downward correction is not out of the question at some point.

---

Want free follow-ups to the above article and details not available to 99%+ investors? Sign up to our free newsletter today!