Stocks: NVIDIA scandal weighs on the broader market

The stock market is set to open lower following reports of a potential ousting of NVIDIA’s CEO. Is this merely part of a broader consolidation?

 The S&P 500 index gained 1.31% on Wednesday, extending its short-term advance and recovering from last Thursday’s selloff. Today, however, the index is expected to open 0.8% lower, weighed down by a decline in NVIDIA shares.

Investor sentiment has deteriorated again, as reflected in yesterday’s AAII Investor Sentiment Survey, which reported that 30.8% of individual investors are bullish, while 51.4% are bearish.

The S&P 500 index has recovered nearly all of the ground lost in last Thursday’s selloff, as shown on the daily chart.

S&P 500 futures contract: Pulling back after the rebound

This morning, the S&P 500 futures contract is trading lower, falling back below the 7,600 level.

Resistance is currently around 7,630, while a support is at 7,560, among other levels.

Market outlook: Extending a medium-term trading range

The S&P 500 index is likely to pull back following yesterday’s advance. So far, the move appears to be part of a broader consolidation. In the short term, it looks like a correction of the recent advance.

The market remains divided, with sector rotations underway. It is difficult to predict whether last week’s declines will resume or whether the market is poised to return to record highs. Overall, the S&P 500 continues to trade within a consolidation that has lasted for more than three months.

Here's what I think is most likely:

• The S&P 500 index is likely to pull back at today’s open, with the move so far appearing to be a correction of its recent gains.
• My Volatility Breakout System is currently long in the market.