Stocks continue to fluctuate – Which way next?

The stock market has extended its consolidation further - is this merely a pause before another advance?

The S&P 500 index closed 0.17% lower on Tuesday, essentially extending its short-term consolidation following the rally on September 21. Today, the index is expected to open 0.4% higher as investors react to the release of the Core PCE Price Index and final GDP figures.

Recently, the investor sentiment has slightly improved, as reflected in last Wednesday’s AAII Investor Sentiment Survey, which reported that 32.7% of individual investors are bullish, while 48.1% are bearish.

The S&P 500 continues to trade within a consolidation, as shown on the daily chart.

S&P 500 futures contract: Moving sideways

This morning, the S&P 500 futures contract is trading higher, extending its consolidation above the 7,700 level.

Resistance is now at 7,780-7,800, while support is at 7,700, among other levels.

Market outlook: Within a two-month-long consolidation range

The S&P 500 index is likely to open higher on Wednesday, continuing to consolidate following the recent rally.

The ongoing Middle East conflict, elevated oil prices, and rising bond yields remain negative factors for the market.

For now, the market still appears to be undergoing a flat correction of its advances from early August.

Here's what I think is most likely:

• The S&P 500 index is essentially moving sideways as investors await further developments in the Middle East and additional economic data.
• My Volatility Breakout System is currently long in the market.

What this means for your portfolio

For individual investors, this environment calls for careful position management. While the market continues to advance, the combination of low volatility, seasonal weakness signals, and stretched valuations suggests that defensive positioning may become increasingly important in the weeks ahead.