Stock Market Outlook for Fri Jan 3 2025 – Second Bounce Attempt Expected

Prior Trading Day Summary:

The first trading day of 2025 saw the day start with a bounce but then the SPX fall to the lows last seen on Dec 20 before some buying managed to push the index up to close just modestly lower.

The S&P closed down 13 points at 5868 and the NASDAQ closed down 30 points at 19280.

Much of the pressure to the downside came from Tesla failing to meet auto sales projections and posted the first annual sales drop since 2011. The stock closed down 6%. Other pressure came from the dollar which hit a 2 year high.

Volume increased on both indexes. When the markets were climbing early in the day over 60% of all volume on the S&P and 75% on the NASDAQ was being traded higher. Later in the afternoon more volume was being traded to the downside but the statistics were biased by the morning buying. Therefore at the close the S&P shows 58% of all volume was to the upside and the NASDAQ showed 70% was to the upside.

With only one day left in the so-called Santa Claus Rally, the odds are against any such rally this year. If history is correct this means there is only a 44% chance the S&P will avoid a correction and end higher per my records going back to 1974.

Let’s review the technical indicators at the close on Thu Jan 2 2025 to see the chance of a second bounce attempt on Fri Jan 3 2025.

Stock Market Outlook: SPX Closing Chart For Thu Jan 2 2025

The index closed below the 21 day and 50 day moving averages and bounced off the Lower Bollinger Band. This is bearish.

The closing candlestick signals that the profit-taking is overdone and stocks should bounce and close higher on Friday.

The 21 day moving average fell back to 6020 which is bearish.

The 50 day moving average is unchanged at 5942 which is bearish.

The 100 day moving average is rising and closed at 5805 which is just 1 point higher. This is bearish.

The 200 day moving average is in an uptrend and closed at 5560 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 is another bearish signal. The Upper Bollinger Band is rising which is bullish.

The S&P chart is still more bearish than bullish but there are more signals that Friday the index may try for a second bounce. Note on Thursday the S&P dipped to the low made Dec 20 before the index rallied. On Thursday the SPX hit the same level and managed to close above it which is a bullish signal.

SPX Stock Market Outlook review of Thu Jan 2 2025

Stock Market Outlook: Technical Indicators Review

Stock Market Outlook for Fri Jan 3 2025 

For Friday the technical indicators are primarily showing oversold levels. A second bounce attempt is likely Friday or Monday.

The Santa Claus Rally is gone for this year. If the so-called January effect is negative this year, it will add to concerns that 2025 will be volatile with a potential for a correction.

But that’s in the future. For Friday the index still looks ready to pop. Thursday morning was strongly bullish. The close was only moderately bearish. Momentum still favors the bulls. I expect Friday will see a second bounce attempt.

Potential Economic and Political Market Moving Events

Monday:

9:45 Chicago business barometer (PMI) stunned with a drop to 36.9

10:00 Pending home sales rose 2.2% beating estimated of 0.7%

Tuesday:

9:00 Case-Shiller home price index was unchanged at 4.6%

Thursday:

8:30 Weekly Initial Unemployment Insurance Claims were lower than expected at 211,000

10:00 Construction spending came in as expected at 0.3%

Friday:

10:00 ISM manufacturing is estimated to slip to 48% from 48.4% prior