Stocks: Is a Deeper Correction Ahead?

Stocks pulled back on Wednesday, but they rebounded from intraday lows, with the S&P 500 index closing just 0.24% below Tuesday’s close. Today, it is expected to open 0.4% lower, according to futures contracts, and may trade sideways following recent weakness. Markets are now waiting for the Jackson Hole symposium over the weekend, amid concerns about potentially hawkish comments from Fed Chair Powell.

The investor sentiment remains relatively weak, as reflected in yesterday’s AAII Investor Sentiment Survey, which reported that 30.8% of individual investors are bullish, while 44.8% are bearish.

The S&P 500 has essentially pulled back toward its late-July levels, as shown on the daily chart.

Nasdaq 100 Retested 23,000 Support

The Nasdaq 100 lost 0.58% on Wednesday after sharply rebounding from a local low of 22,959.70. This suggests that selling pressure is not strong enough to deepen the correction by much. Support remains around 23,000, while resistance stands at 23,300–23,500.

VIX Bounced Before Coming Back Lower

Yesterday, the VIX (Volatility Index) rebounded to a local high of 17.19, but closed below 16, confirming investor uncertainty.

Recently, the decline in VIX reflected declining investor fear (declining gold prices indicate the same thing).

Historically, a dropping VIX indicates less fear in the market, and rising VIX accompanies stock market downturns. However, the lower the VIX, the higher the probability of the market’s downward reversal. Conversely, the higher the VIX, the higher the probability of the market’s upward reversal.

S&P 500 Futures Contract: Back Below 6,400

This morning, the S&P 500 futures contract is trading below the 6,400 level, retracing yesterday’s intraday rebound. Support is around 6,360, while resistance is at 6,420–6,430.

Market Outlook: Sentiment Weakens

Thursday’s trading session is set to open lower, with the S&P 500 expected to start 0.4% below yesterday’s close. Investors remain cautious ahead of the Jackson Hole symposium this weekend, as hawkish comments from Fed officials could add to uncertainty.

Here’s what I think is most likely:

• The S&P 500 rebounded from intraday lows yesterday, but bulls are not out of the woods yet.
• Markets are waiting for the Jackson Hole Symposium over weekend.

What This Means for Your Portfolio

For individual investors, this environment calls for careful position management. While the market continues to advance, the combination of low volatility, seasonal weakness signals, and stretched valuations suggests that defensive positioning may become increasingly important in the weeks ahead.

The current market conditions highlight the value of having a systematic approach to investing rather than trying to time every market move. Whether you’re using technical systems like the Volatility Breakout System or following seasonal patterns, having a disciplined framework becomes crucial during uncertain times.

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Thank you.

Paul Rejczak
Stock Trading Strategist