Stocks were mixed on Wednesday following the Fed's Rate Decision release. We saw an increased volatility after the announcement, but overall there wasn't much of a change. The S&P 500 index was the highest since the early October on Tuesday. But will the rally continue despite short-term technical overbought conditions?
The U.S. stock market indexes were mixed between -0.5% and +0.1% on Wednesday, as investors reacted to the FOMC Statement release. The S&P 500 index retraced more of its October-December downward correction of 20.2% on Tuesday. The broad stock market's gauge is just 4.0% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average lost 0.5% and the Nasdaq Composite gained 0.1% on Wednesday.
The nearest important resistance level of the S&P 500 index remains at 2,850-2,860, marked by the early October local lows. The resistance level is also at around 2,875, marked by October the 10th daily gap down of 2,874.02-2,874.27. 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 slightly 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 previous local highs? There have been no confirmed negative signals so far. The index is still close to the previously broken two-month-long upward trend line:
Mixed Expectations Again
Expectations before the opening of today's trading session are slightly negative, because the index futures contracts trade between -0.2% and -0.1% vs. their yesterday's closing prices. The European stock market indexes been mixed so far. Investors will wait for some economic data announcements today: Philly Fed Manufacturing Index, Unemployment Claims at 8:30 a.m., CB Leading Index at 10:00 a.m. The broad stock market will likely extend its short-term consolidation today. There have been no confirmed negative signals so far.
The S&P 500 futures contract trades within an intraday consolidation following yesterday's late-session decline. The nearest important resistance level is at around 2,840-2,850, marked by the short-term local highs. On the other hand, the support level is at 2,815, marked by the local lows. The futures contract remains close to the recent local lows, as we can see on the 15-minute chart:
Nasdaq Close to New High
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market rallied more than 1,600 points from December the 26th local low of around 5,820. The nearest important resistance level is now at 7,450. On the other hand, the support level is at 7,300-7,350, marked by the recent resistance level. The Nasdaq futures contract trades along the 7,400 mark this morning, as the 15-minute chart shows:
Amazon Extends the Uptrend, Apple Lags
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. The next resistance level is at $190-200. There have been no confirmed negative signals so far:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The price broke above the previous local high on Monday and yesterday it broke above the $1,750 resistance level. The market extends the recent run-up above the broken downward trend line. However, it is now close to the previous medium-term highs:
Dow Jones Still Relatively Weaker
The Dow Jones Industrial Average retraced some more of its recent decline on Tuesday, following bouncing off the support level of around 25,000-25,500 a week ago. However, then it reversed its upward course and bounced off the 26,000 mark. For now, it looks like an upward correction and the resistance level remains at 26,000:
Nikkei Going Sideways
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. Since then it has been retracing the downtrend. Recently the market broke above its local highs and the 21,000 resistance level. But then it bounced off the resistance level of around 22,000 and retraced most of the recent advance. It bounced off the 21,000 mark again. For now, it looks like a consolidation:
The S&P 500 index extended its short-term uptrend on Tuesday, as it got the highest since October the 10th again. The market came back to the previously broken two-month-long upward trend line recently. So will it act as a resistance level? We could see some short-term uncertainty, as stocks reach their previous medium-term highs.
Concluding, the S&P 500 index will likely open slightly lower today. We may see more short-term uncertainty following yesterday's Fed's Statement release. There may be some profit-taking action in the near term.
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Paul Rejczak Stock Trading Strategist Sunshine Profits - Effective Investments through Diligence and Care
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