On Friday when the S&P 500 index opens, it’ll be down 1.6%. This decline follows a particularly tumultuous week in the stock market. If realized, it will be a larger drop than the previously estimated reduction of 0.04%, which took effect last Thursday. It’s notable given the context of a deep, 1.6% drop yesterday. The recent trading trend represents a dramatic drop off from the high point of the index’s record earlier this week. On Monday, it had jumped to its highest level since February, nearing the 6,000-point threshold. Market analysts are watching this market decline with cautious eyes, as it indicates an impending market collapse for investors and a market crash of stability and prosperity.
The S&P 500’s new support zone is now right at 5,700. Very important support lies between 5,750 and 5,800. That selloff was compounded when S&P 500 futures contracts accelerated their selloff, breaking through the key 5,800 level. This often bullish movement leads us to believe that the index is breaking out of its consolidation pattern seen in January and February. Investors are preparing for at least one more retest of those depths as the market finds its footing amid an unfolding economic story.
Market Performance Overview
On Wednesday, the S&P 500 fell 1.6%, a sign of the deepening worry over rising bond yields among jittery investors. The index saw a strong initial recovery, moving within striking distance of that all important 6,000 mark. Yet, it ended up not being able to get above this strong resistance line. The market’s failure to build on that initial bullish momentum has led to some wild swings. Consequently, the volatility index has been lingering dangerously high, persistently refusing to budge below the critical 20 level. Those are the sorts of indicators that suggest fears are increasing among market participants about the sustainability of the recent run-up.
Unfortunately, a myriad of external factors drastically changed the entire trading landscape. The combination of economic data releases and rising geopolitical tensions loomed heavily on investor sentiment. In reaction, many investors are adjusting – or recalibrating – their positions, creating more selling pressure that’s spreading across all the major indices. Amidst this downturn, many wonder if the S&P 500 can get back on its feet? Will it soar to new heights, or does it face continued headwinds in the weeks ahead?
Investor Sentiment and Future Outlook
Even with this current downturn, investor sentiment has proven to be quite resilient. According to the most recent AAII survey, 37.7% of individual investors are bullish on future market performance. In comparison, 36.7% of them are bearish on the outlook. Many investors are tentatively pleased by the recent market downturns. They’ve been waiting for the markets to dip, betting that these dips will allow them to buy in at more attractive lower prices.
The 30-year Treasury yield continues to stay above that key 5% psychological barrier. Its existence would certainly influence future investment decisions. Rising yields often prompt investors to reassess their equity holdings in favor of fixed-income securities, which may further pressure stock prices. Market analysts are concerned that higher yields could trigger more selling in the stock market. Investors will start looking for safer, more competitive returns.
Going forward, market analysts are looking for a few important levels for the S&P 500. The index needs to remain above these key support levels of 5,700 and 5,750-5,800 region. This will be important to determine where it goes in the short run. A break of such levels would almost certainly be seen as further signal of deeper correction ahead for the index, increasing gloom among market participants.