S&P 500: Secrets of the stock market’s rise, but how long will it last?

Stock prices broke their short-term losing streak yesterday, with the S&P 500 index rising by 0.86%.

The market continued to follow its record high set last week, albeit at a very slow pace.

Today, Thursday, it is trading at $5259, after stock prices were affected by the interest rate decision made by the Federal Open Market Committee last Wednesday.

Investors are gearing up this week for the release of the Core Personal Consumption Expenditures Index numbers tomorrow, Friday, and in my view, market volatility will be weak, and market reaction limited due to tomorrow’s holiday with the approaching long weekend, so the data’s effects may extend to the beginning of next week.

Today, S&P 500 futures rose by 0.1%, indicating a neutral opening for the index. The question here is: will this upward trend continue? The answer is somewhat contradictory; a downward correction seems possible, but the overall trend remains upward.

So, despite concerns about stock valuations, the market has risen to new record levels, fueled by hopes for the Federal Reserve’s monetary policy stance and the AI revolution. Last week, it was all about the Federal Reserve, and thus the market’s reaction was positive. It seems to me that the S&P 500 index is still moving cautiously at the moment.

While the indices have hit new record levels, most stocks have been moving sideways. This could be a pattern signaling a peak before a deep price correction. However, prices have not given any definite negative signals. So, the possibility of a trend reversal to the downside cannot be ruled out at any time.

In my view, investor sentiment has improved significantly, and risk appetite in the markets has increased. An investor sentiment survey released by AAII yesterday showed that 50.0% of individual investors are optimistic, while only 22.4% are pessimistic, down from 27.2% last week. The AAII index is a contrarian indicator, meaning that extremely bullish readings may indicate excessive complacency and a lack of fear in the market. Conversely, bearish readings are favorable for market rallies.