The S&P 500 reached a new all-time high last Thursday, recovering from a brief downturn at the start of the year. U.S. stocks initially reacted poorly to new PPI data, resulting in a sell-off below the 50-day moving average. However, as has been common in recent years, the correction turned out to be a bear trap, with investors taking advantage of the latest buy-the-dip opportunity.
After a strong rally where the S&P 500 has been higher in seven of eight sessions, the price has rallied significantly into a resistance zone. There are some open price gaps below that may need filling. The bulls are in control, but some market consolidation would be logical.
According to the CNN Fear & Greed Index, sentiment has moved from “Extreme Fear” to “Neutral.” Investors are not overly bullish, but they are no longer excessively fearful. It will be important to watch if shallow pullbacks lead to a sentiment decline, which would be a bullish contrarian signal. Although historical post-election seasonal patterns are usually bullish, February can be difficult for the market.
S&P 500 hits all-time high
A pullback might be expected next month. Last week, Microsoft CEO Satya Nadella indicated strong AI spending for the “Stargate” project.
Meanwhile, Meta Platforms CEO Mark Zuckerberg announced $65 billion in capital expenditures for AI in 2025. AI spending is increasing, including in areas such as data centers and their associated energy needs. Beyond AI, other market areas like quantum computing and robotics are showing strength.
Animal spirits are alive and well. The current market outlook appears bullish, especially over the long term. However, investors should avoid the urge to chase all-time highs and the fear of missing out.
Instead, it is advisable to wait for high-probability pullback setups within the uptrend.
