The broad stock market slightly extended its short-term downtrend on Friday, as investors continued taking profits off the table after the recent record-breaking rally. However, the S&P 500 index remains relatively close to its record high. Is this a topping pattern or just a pause before another leg up?
The U.S. stock market indexes lost 0.2-0.3% on Friday, slightly extending their short-term downtrend, as investors reacted to the monthly jobs data release. The S&P 500 index has reached the record high of 2,916.50 on August the 29th. It currently trades 1.5% below that high. Both, Dow Jones Industrial Average and the technology Nasdaq Composite lost 0.3% on Friday.
The nearest important level of support of the S&P 500 index is now at around 2,855-2,860, marked by the previous short-term local lows. The support level is also at 2,830-2,835. On the other hand, the nearest important level of resistance is at 2,885, marked by the previous support level. The next resistance level is at 2,900. The resistance level is also at 2,910-2,915, marked by the mentioned late August record high.
The broad stock market reached the new record high in the late August, as it extended its short-term uptrend above the level of 2,900. Since then it trades within a downward correction. The market retraced its late August advance, and it got back down to the support of its late January high. Will it continue lower or reverse higher towards the all-time high? For now, it looks like a downward correction within an uptrend. The index continues to trade above its medium-term upward trend line, as we can see on the daily chart:
The index futures contracts trade 0.4-0.6% above their Friday's closing prices this morning. So, expectations before the opening of today's trading session are positive. The European stock market indexes have gained 0.3-0.5% so far. There will be no new important economic data announcements today. The broad stock market will probably continue to fluctuate following the recent run-up. For now, it looks like a correction within an uptrend. There have been no confirmed negative signals so far.
The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its Friday's decline. consolidation following its yesterday's intraday decline. The nearest important level of resistance is now at around 2,890-2,895, marked by the local highs. The next resistance level is at 2,900. On the other hand, the support level is at 2,875, among others. The futures contract trades at its short-term downward trend line, as the 15-minute chart shows:
Nasdaq Still Below 7,500 Mark
The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its Friday's decline. It remains relatively weaker than the broad stock market following almost 4% downward correction off its August the 30th record high of around 7,700. The nearest important support level is now at 7,390-7,420. On the other hand, the level of resistance is at 7,480-7,500, among others. The Nasdaq futures contract is now above its recent downward trend line, as we can see on the 15-minute chart:
Apple, Amazon - New Downtrend or Just Correction?
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached the new record high at the level of $229.67 on Wednesday before reversing its intraday uptrend and closing lower. Then it broke below its month-long upward trend line. The nearest important level of support is at $215-220, marked by the recent consolidation. It looks like a short-term downward reversal:
Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It has reached the new record high at the price of $2,050.50 almost a week ago on Tuesday. Since then it is retracing its recent rally. The stock broke below the month-long upward trend line. We still can see negative technical divergences. It looks like a topping pattern:
Dow Jones Continues to Fluctuate
The Dow Jones Industrial Average fluctuates following its August advance. The blue-chip stocks' gauge continues to trade along the level of 26,000. But it is still way below its late January record high of 26,616.71. The nearest important level of resistance is at 26,340-26,440, marked by the late January daily gap down. The index remains above its two-month long upward trend line, as the daily chart shows:
The S&P 500 index reached the new record high at the level of 2,916.50 in the late August. Since then the broad stock market retraced some of its rally and it got back below 2,900 mark. Was it a meaningful downward reversal or just a correction before another leg up? There have been no confirmed negative signals so far. However, we can see some short-term overbought conditions along with negative technical divergences.
Concluding, the S&P 500 index will likely open slightly higher today. Then it may extend its short-term fluctuations following the late August record-breaking rally. For now, it looks like a downward correction within an uptrend from the August local low of around 2,800. There have been no confirmed negative medium-term signals so far.
If you enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sing me up!
Read more by MarketSlant Editor