The U.S. stock market indexes were mixed between -0.2% and +0.5% on Friday, extending their short-term fluctuations, as investors continued to hesitate following last week's sell-off. The S&P 500 index remains above 2,700 mark after bouncing off the support level on Wednesday-Thursday. The index was 11.5% below September the 21st record high of 2,940.91 three weeks ago. And now it trades 7.0% below the all-time high. The Dow Jones Industrial Average gained 0.5% and the Nasdaq Composite lost 0.2% on Friday.
The nearest important level of resistance of the S&P 500 index remains at around 2,750-2,775, marked by the recent support level and the short-term local highs. The next resistance level is at 2,795-2,800, marked by Friday's daily gap down of 2,794.10-2,794.99, among others. The resistance level is also at 2,815-2,820, marked by the mid-October local high of 2,816.94. On the other hand, the support level remains at 2,700, marked by the previous short-term consolidation. The next support level is at 2,685, marked by the late October daily gap up. The support level is also at 2,600-2,630, marked by the late October lows.
The broad stock market extended its downtrend three weeks ago, as the S&P 500 index fell closer to 2,600 mark. Since then it fluctuates within a relatively wide trading range following the recent advance above the level of 2,800. On Wednesday and on Thursday the index fell below 2,700 and it is trading close to the long-term upward trend line again:
Short-Term Consolidation
Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.4% below their Friday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for the NAHB Housing Market Index release at 10:00 a.m. The broad stock market will likely continue its short-term fluctuations this morning. We may see another attempt at breaking above the resistance level. However, there have been no confirmed short-term positive signals so far.
The S&P 500 futures contract trades within an intraday consolidation, as it remains within its late Friday's intraday consolidation. The nearest important level of resistance is now at around 2,745-2,750, marked by some previous local highs. On the other hand, the support level is at 2,690-2,700. The futures contract trades along its last week's local highs, as we can see on the 15-minute chart:
Nasdaq Still Below 7,000
The technology Nasdaq 100 futures contract follows a similar path, as it extends its short-term fluctuations. On Friday investors reacted to worse-than-expected quarterly earnings release from NVIDIA Corp., but the tech stocks' gauge remained virtually flat. It continues to fluctuate following the recent breakdown below 2,700 mark. The nearest important resistance level remains at 6,900-7,000. On the other hand, the support level is at 6,750-6,800. The Nasdaq futures contract extends its short-term consolidation, as the 15-minute chart shows:
Big Cap Tech Stocks Bouncing - Upward Correction?
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock accelerated the downtrend a week ago following breaking down below the support level of around $200. It was relatively weaker than the broad stock market recently, as investors continued to react to the quarterly earnings release. The stock fell the lowest since July. The nearest important level of support is at $185. We may see attempts at bouncing off that support level:
Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its sell-off following quarterly earnings release in the late October. The stock continued lower, but then it bounced off the support level of $1,500. The price reached a potential resistance level of around $1,750-1,800 before reversing lower. Last week the stock retraced some more of its recent advance. For now, it looks like a downward correction:
Dow Jones Remains Above 25,000
The Dow Jones Industrial Average fell below 25,000 mark on Thursday, before bouncing off the support level and closing higher. It continued higher on Friday. Recently it accelerated above 26,000 mark and got closer to the early October topping consolidation. Then the blue-chip stocks gauge retraced most of the rally. The nearest important level of resistance is now at 25,750-26,000, and the support level remains at 24,750-25,000:
Japanese Nikkei - Narrow Trading Range
Let's take a look at the Japanese Nikkei 225 index now. It retraced more of its October sell-off recently, but then it failed to continue higher following bouncing off the resistance level at 22,500. Then we saw more downward action. The Nikkei continues to trade below its broken long-term upward trend line. It is still at the October the 25th daily gap down:
The S&P 500 index extended its short-term downtrend last week, as it fell below 2,700 mark on Wednesday and on Thursday. On Friday the broad stock market bounced, but it continued to trade below the short-term local highs. On the other hand, the index continues to trade above the support level of the October the 31st daily gap up.
Concluding, the S&P 500 index will probably open lower today and it will likely extend its last week's short-term consolidation. For now it looks like consolidation within a downtrend. We may see more short-term volatility.
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Paul Rejczak
Stock Trading Strategist
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