Stocks rebound, but is a new uptrend beginning?

The stock market is likely to trade sideways this morning – will buyers step in?

The S&P 500 index gained 1.58% on Wednesday as the market reacted to the U.S. midterm election results. It broke above its recent trading range, moving back above the 7,600 level. Today, the index is expected to open virtually flat.

Investor sentiment has deteriorated, as reflected in yesterday’s AAII Investor Sentiment Survey, which reported that 34.1% of individual investors are bullish, while 48.4% are bearish. 

The S&P 500 index is still trading within months-long consolidation, as shown on the daily chart.

S&P 500 futures contract: Uncertainty following Yesterday’s rally

This morning, the S&P 500 futures contract is trading sideways, extending the consolidation that followed yesterday’s rally from the overnight low.

Resistance is currently around 7,750, while a support is at 7,700, among other levels.

Market outlook: Extending a three-month-long consolidation

The S&P 500 index is likely to open near the 7,700 level, trading sideways following yesterday’s advance. Overall, the market appears to be hesitating after the rally triggered by the U.S. midterm election results.

Investors are awaiting further earnings releases and tomorrow’s monthly jobs report.

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 may trade sideways following yesterday’s rally, with Friday’s jobs report in focus.
• My Volatility Breakout System is currently long in the market.