Wednesday's trading session was slightly bearish, as stocks retraced some of their Tuesday's advance. The S&P 500 index was the highest since the early October a week ago. But then the market sold off. So was that sell-off a medium-term downward reversal or still just a correction?
The U.S. stock market indexes lost 0.1-0.6% on Wednesday, as investors continued to hesitate following last week's Friday's sell-off. The S&P 500 index retraced more of its October-December downward correction of 20.2% recently. The broad stock market's gauge traded just around 3% below September the 21st record high of 2,940.91 last week. But then it fell close to the 2,800 mark again. The Dow Jones Industrial Average lost 0.1% and the Nasdaq Composite lost 0.6% on Wednesday.
The nearest important resistance level of the S&P 500 index remains at around 2,830-2,845, marked by the recent local highs. The resistance level is also at 2,850-2,860, marked by the early October local lows. On the other hand, the support level is at 2,800-2,810, marked by the recent resistance level and the daily gap up of 2,798.32-2,799.78. The support level is also at 2,785, marked by the daily gap up of 2,784.00-2,786.73.
The broad stock market retraced all of its December sell-off and it broke above the medium-term resistance level of around 2,800-2,820, marked by the October-November local highs recently. So is it still just a correction or a new medium-term uptrend? The market broke above the 61.8% Fibonacci retracement of the 20% decline. And we may see an attempt at getting back to the record highs. But will the index continue much higher above the mentioned local highs? Last Friday's trading session cast some doubts on bulls' power. However, there have been no confirmed negative medium-term signals so far. The index bounced off the previously broken two-month-long upward trend line:
Positive Expectations, Upward Reversal or Just Consolidation?
Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade along their Wednesday's closing prices. The European stock market indexes have gained 0.1-0.4% so far. Investors will wait for some economic data announcements today: the Final GDP, Unemployment Claims at 8:30 a.m., Pending Home Sales at 10:00 a.m. The broad stock market will likely continue to fluctuate following the recent decline. For now, it looks like a consolidation within a medium-term uptrend.
The S&P 500 futures contract trades within an intraday uptrend, as it retraces its overnight advance. The nearest important resistance level is at 2,820-2,830, marked by some short-term local highs. On the other hand, the support level remains at 2,790-2,800. The futures contract continues to trade within a week-long consolidation, as we can see on the 15-minute chart:
Nasdaq Also Going Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market rallied more than 1,700 points from December the 26th local low of around 5,820. But then it fell more than 250 points from the last Thursday's overnight local high. The nearest important resistance level remains at 7,400-7,450. On the other hand, the support level is at 7,200-7,250, among others. The Nasdaq futures contract remains below the three-day-long downward trend line, as the 15-minute chart shows:
Big Cap Tech Stocks Extend Their Consolidation
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The market broke above its recent local highs a week ago and then it continued above the $180 level. On Thursday and on Friday the stock accelerated the uptrend and it traded within a resistance level of $190-200. But then it reversed its upward course. For now, it looks like a correction following the recent advances:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The price broke above the previous local high early last week and on Thursday it broke above the $1,800 level. However, Friday's trading session was bearish as the stock bounced off the resistance level. The nearest important support level is now at $1,700:
Dow Jones Still Below 26,000
The Dow Jones Industrial Average retraced some more of its early March decline last week, but on Friday it reversed lower. The resistance level remains at around 26,000. And the blue-chip stocks gauge continues to trade below the February local high. However, it is still above the important 25,000 mark:
Nikkei: Back to Local Low
Let's take a look at the Japanese Nikkei 225 index. It accelerated the downtrend in late December, as it fell slightly below the 19,000 level. Then it was retracing the downtrend for two months. In March the market goes sideways. Today, the index fell to 21,000 again. It still looks like a flat correction following the January-February advance. However, if the Nikkei breaks below 21,000, we could see more selling pressure:
The S&P 500 index extended its short-term uptrend last week, as it got the highest since October the 10th again. But then the market bounced off the previously broken two-month-long upward trend line and it fell almost 2% on Friday. Will stocks continue lower? For now, it looks like a relatively flat correction within a three-month-long uptrend.
Concluding, the S&P 500 index will likely open virtually flat today. We may see some more short-term uncertainty following last week's Thursday's rally and the Friday's sell-off. Thank you.
Paul Rejczak Stock Trading Strategist Sunshine Profits - Effective Investments through Diligence and Care
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