In This Article:
Today’s Market Update:
Thursday, the S&P 500 Index notched a fresh new all-time high, thoroughly shaking off a brief bout of selling that plagued stocks to start the new year. Initially, US equities reacted poorly to new PPI data, causing a sell-off below the 50-day moving average and price support. However, as has been the case over the past couple of years, the correction ended up being nothing more than a bear trap, with investors yet again benefitting from the latest buy-the-dip opportunity. After a frozen rope rally where the S&P 500 has been higher in seven of eight sessions, here’s where we stand now.
1. Technical View: Price has rallied straight up from the bottom into a resistance zone. Meanwhile, there are some open price gaps below that could want to be filled. Overall, the bulls are in control but some digestion at these levels would make sense.
2. Sentiment Shift: As measured by the CNN Fear & Greed Index, sentiment has jumped from “Extreme Fear” levels to “Neutral.” While investors are not overly bullish, they are no longer excessively fearful. Investors should watch to see if the “one foot out the door” mentality continues on shallow pullbacks and sentiment sinks (this would be a bullish contrarian signal).
Image Source: Zacks Investment Research
3. Seasonality: Though historical post-election seasonal patterns are usually bullish, February tends to be a treacherous period for most. Could we finally get a much-needed pullback next month?
Image Source: Hirsch Holdings (@almanactrader)
4. AI Spending Remains Robust: Earlier this week, Microsoft (MSFT) CEO Satya Nadella said that he is “good for $80 billion” in AI spending for the “Stargate” project, which includes companies like Nvidia (NVDA), Oracle (ORCL), and Arm Holdings (ARM). Meanwhile, Meta Platforms (META) CEO Mark Zuckerberg announced that he is spending $65 billion in CAPEX in 2025 toward AI. Clearly, AI spending is not slowing down any time soon, and if anything, it’s ramping. The AI spending will ramp up in other areas, such as data center and data center energy.
5. Animal Spirits are Alive and Well: AI is not the only risk-on market area exhibiting strength.Quantum computing stocks likeRigetti (RGTI) bounced viciously this week, whilerobotics stocks like Serve Robotics (SERV) heated up.
Bottom Line
The current market outlook leans bullish, especially over the long-term. However, like is always the case, investors should avoid chasing all-time highs and the “fear of missing out” and instead wait patiently for high probability pullback set ups to emerge within the uptrend.