Stocks: A failed rebound – But will the downtrend continue?

The stock market is fluctuating following last Friday’s sell-off, but is this a bottoming pattern?

The S&P 500 index closed 0.51% lower on Monday, extending Friday’s sell-off but rebounding from a local low of around 7,540. Today, the index is expected to open 0.1% lower following yesterday’s earnings release from AAPL, whose shares are expected to open around 4% lower.

Recently, the investor sentiment has improved, as reflected in last Wednesday’s AAII Investor Sentiment Survey, which reported that 37.8% of individual investors are bullish, while 41.4% are bearish.

The S&P 500 index remained near its local lows on Monday, as shown on the daily chart.

S&P 500 futures contract: Trading near Friday’s low

This morning, the S&P 500 futures contract is trading sideways following yesterday’s pullback and the sell-off triggered by AAPL’s earnings release.

Resistance is currently around 7,600, while a support is at 7,550, among other levels.

Market Outlook: Attempting to Break Below Three-Month-Long Consolidation

The S&P 500 index is likely to open slightly lower or close to flat today. Investors are awaiting further earnings releases and the results of the U.S. midterm elections.

So far, price action suggests that the index is extending the consolidation that began in early August. However, the market is trading near the lower boundary of this range.

Here's what I think is most likely:

• The S&P 500 index moved back toward Friday’s low yesterday, but a short-term consolidation appears likely.
• My Volatility Breakout System is currently long in the market.