Is the S&P 500 expected to go up, the S&P 500 is facing several bearish indicators that signal potential challenges ahead.
As we reflect on the market's performance in 2024, we find ourselves up 29.28%, while the S&P 500 index has seen an increase of 23.67% for the year. This significant growth has raised questions about the sustainability of these gains moving forward. In particular, indicators from the NYSE Short Term Trade Index (TRIN) are signaling potential challenges ahead.
The bottom window of our analysis displays the 100-day average of the NYSE Short Term Trade Index, which has been hovering at a critical threshold. Currently, the TRIN reading stands at 0.99, indicating bearish sentiment. To provide context, we have previously highlighted the 63-day average of the TRIN, which suggested a bearish outlook based on three months of data.
Historically, when the 100-day TRIN reaches 1.00 or lower, it has often signaled important market tops. Our chart, which spans back to 2010, marks these instances with red and blue lines. Out of the eight occasions where the TRIN hit 1.00, six were associated with significant market peaks, accounting for a 75% correlation. This historical analysis points toward the possibility that 2025 may pose considerable challenges for investors.
In our recent observations, we noted the panic TRIN closes, represented in blue on our selling gap chart. These panic signals, particularly those above 1.20, tend to indicate extreme selling pressure, often occurring near market lows. The TRIN closes near this panic threshold coincided with the 587 level on the SPY, suggesting a potential support area.
However, we identified a gap in shaded green on the chart that was tested today with increased volume, raising concerns that this gap might not hold as support. Current indicators present a mixed picture: while the broader trend appears to be topping (as suggested by both the 63-day and 100-day TRIN), the short-term direction remains uncertain, perhaps indicating the formation of a low. At this juncture, a clear setup for traders is lacking.
We also updated our analysis of the GDX/GLD ratio, which has been tracked since 2009. The current reading stands at 0.145, a level that historically indicates an intermediate-term low for the VanEck Gold Miners ETF (NYSE:GDX). We have previously marked these critical points with red dotted lines, emphasizing their significance in market analysis.
Investment Considerations
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As we look ahead, it’s essential to consider broader economic trends. Recent labor market gains demonstrate resilience, yet underlying data suggests a slowing momentum. This could impact the S&P 500 and its constituents as we navigate through 2025.
A hot Consumer Price Index (CPI) report could further accelerate yield curve steepening, raising concerns about stagflation—a scenario that could complicate investment strategies.
In light of the current performance and bearish indicators, investors should remain cautious as we transition into 2025. The S&P 500's strong gains in 2024 may not continue, and understanding the underlying risks will be crucial for navigating potential market volatility. As always, staying informed and adaptable will be key in these uncertain times.
When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.
Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
