Stock Market Outlook for Wed Jan 8 2025 – Possible Rally Attempt But Still Lower

Prior Trading Day Summary:

On Tuesday the day ended as expected. Monday’s close pointed to a bounce attempt to start the day and then more selling and a lower close. The close though was lower than I had expected. The problem with sell-offs is as the index falls it keeps hitting sell orders which leads to more selling. It’s a snowball effect which is why large down days normally see some kind of bounce in the morning.

The S&P closed down 66 points which wiped out Monday’s rally but not all of Friday’s. Volume was 4.6 billion and 49% of all volume was actually trading higher. However 66% of all stocks were falling. The index closed at 5909 which was the same valuation as on Dec 30 when it closed at 5906 after a fall of 64 points on that Monday.

The NASDAQ saw huge volume of 12.9 billion shares traded however 65% of all the volume was actually trading higher. The problem was the up volume was concentrated on a smaller number of stocks. Only 21% of NASDAQ stocks rose while 66% fell. The NASDAQ lost 375 points to end the day at 19,489. This is almost the same level the NASDAQ was at on December 30 when it closed down 235 points to close at 19486.  The NASDAQ is actually trading sideways and closed almost at the same level as Dec 3 when it closed at 19,480.

By and large the indexes are moving more sideways as they gyrate up and then down. Bond yields are climbing which is a primary factor pressuring stocks lower.

Let’s review the technical indicators at the close on Tue Jan 7 2025 to see what they can tell us about Wed Jan 8 2025.

Stock Market Outlook: SPX Closing Chart For Tue Jan 7 2025

The index closed back below both the 21 day and the 50 day moving averages. This is bearish.

The closing candlestick is bearish but also signals stocks are oversold. We could see a lower move and then a bounce but the close will be negative.

The 21 day moving average fell back to 5984 which is bearish.

The 50 day moving average is rising and closed at 5950 which is bullish.

The 100 day moving average is rising and closed at 5813 which is bullish.

The 200 day moving average is rising and closed at 5572 which is bullish.

The Lower Bollinger Band is below the 50 day and moving lower which is bearish. It may fall below the 100 day shortly which would be a bearish signal. The Upper Bollinger Band is falling which is bearish.

The S&P chart is more bearish than bullish for Wednesday.

SPX Stock Market Outlook review of Tue Jan 7 2025

Stock Market Outlook: Technical Indicators Review

Stock Market Outlook for Wed Jan 8 2025 

On Tuesday the SPX closed at the 5900 support level. If you look at the Support/Resistance chart above you can see that the index is now falling into support zones. There is a chance we could see the SPX fall to around 5830 to 5850 over the next few trading days which would match the low of Dec 20 and Jan 2. The SPX has been having trouble building momentum to break above 6000 convincingly and part of the problem is valuations are too high as bond yields continue to climb. On Tuesday for example the 30 year bond was nearing 5% as stocks fell in the afternoon. Once earnings begin next week, we may see revenue that supports higher valuations but until then the SPX has been trading between roughly 5900 and 6000 since the November elections without being able to find buyers for stocks as they push the SPX above 6000. Since Nov 5 there have been 4 rallies which were profitable for traders but which have not had buy in from enough investors rather than traders.

On Tuesday ISM services and Job openings both pressured bond yields higher which resulted in stocks moving lower.

On Wednesday we get the initial jobless claims that may impact stocks if they are too high or too low below 215,000 estimated. At 2:00 PM we get the latest FOMC minutes from the December Fed meeting but nothing new is expected. We could see a bit of a bounce just before the minutes are released. Overall the minutes are expected to be fairly hawkish on when the next interest rate cut will occur. This may pressure stocks somewhat is the outlook is vague or further into 2025. At present most analysts expect a rate cut in March at earliest.

Wednesday may see some less trading action ahead of Thursday’s closure for the National Day Of Mourning. Stocks still look like they could open higher and then dip back or open lower, rally and then dip back. The day is expected to end lower.

Potential Economic and Political Market Moving Events

Monday:

9:45 S&P final services PMI came in slightly higher than expected at 56.8

10:00 Factory orders for November were lower than estimated at -0.4%

Tuesday:

8:30 Trade deficit came in slightly above estimated at -78.2 billion for November

10:00 ISM services were stronger than expected at 54.1% which pushed bond yields higher

10:00 Job openings surprised with a robust 8.1 million which again put pressure on bond yields

Wednesday:

8:15 ADP employment is estimated to fall to 136,000 from 146,000

8:30 Weekly Initial Unemployment Insurance Claims are expected to rise to 215,000 from 211,000

10:00 Wholesale inventories are estimated to fall to -0.2% from 0.2% prior

2:00 Minutes of Fed’s December FOMC meeting is not expected to strongly impact market action

3:00 Consumer credit is estimated to have fallen to $9.1 billion from $192 billion prior