The U.S. stock market indexes lost 0.2-0.4% on Wednesday, retracing some more of their recent rally as investors continued to take short-term profits off the table. The S&P 500 index traded more than 180 points above its last week's Monday's local low on Tuesday. It is currently 2.5% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average lost 0.2% and the Nasdaq Composite lost 0.4% on Wednesday.
The nearest important resistance level of the S&P 500 index remains at 2,900-2,910. The resistance level is also at 2,930-2,950. On the other hand, the support level is at 2,875-2,880. The next support level remains at 2,830-2,850.
The broad stock market broke above the last year's high in the early May. But then the S&P 500 index retraced all of the April's advance. The market also broke below its two-month-long upward trend in the early May. And now it got back higher following breaking above the month-long downward trend line:
More Short-Term Fluctuations
The index futures contracts trade 0.3% above their yesterday's closing prices, so the expectations before the opening of today's trading session are slightly positive. The European stock market indexes have gained 0.1-0.4% so far. Investors will wait for the Unemployment Claims number release at 8:30 a.m. The broad stock market will likely further extend its short-term consolidation following last week's rally. The S&P 500 index may fluctuate below the mentioned resistance level of 2,900.
The S&P 500 futures contract trades within an intraday consolidation following an overnight advance. The nearest important support level is at around 2,865-2,875, marked by the short-term local lows. On the other hand, the resistance level remains at 2,890-2,900. The futures contract gets closer to the recent consolidation this morning, as the 15-minute chart shows:
Nasdaq Still Close to 7,500
The technology Nasdaq 100 futures contract follows a similar path, as it trades higher this morning. The market extended its rally on Friday, following breaking above the resistance level of 7,250-7,300. Then it broke above the 7,500 mark and entered a short-term consolidation. It got close to the 7,600 mark on Tuesday, before reversing downwards. The nearest important resistance level remains at 7,550-7,600. The Nasdaq futures contract retraces more of its recent decline, as we can see on the 15-minute chart:
Big Cap Tech Stocks - Short-Term Sideways Trend
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock extended its rally on May the 1st following the quarterly earnings release. Then the price reversed the upward course and broke below the medium-term upward trend line. Since then it was trading within a downtrend. And last week the stock broke above its downward trend line. For now, it looks like an upward correction. However, if the stock gets back above $200, we could see more buying pressure:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock accelerated its uptrend in late April. Since then, the market was trading within a consolidation. On Monday a week ago it broke below the support level, but then it got back higher. It reached the new record high of $134.24 on Tuesday, before reversing its intraday uptrend once again:
Dow Jones Also Going Sideways
The Dow Jones Industrial Average has been relatively weaker than the broad stock market since February. The resistance level remained at around 26,800-27,000, marked by the last year's topping pattern and the record high of 26,951.8. Recently the blue-chip stocks' gauge followed the broad stock market, as it accelerated the downtrend. The market broke below its important 200-day moving average, but then it got back higher. The resistance level is now at around 26,000, marked by the previous local highs:
Nikkei Back at 21,000
Let's take a look at the Japanese Nikkei 225 index. It retraced some more of its recent decline early this week. However, the market got back down to the 21,000 mark today. The index continues to trade along the previous local lows:
The S&P 500 index accelerated its short-term downtrend a week ago, as it fell to the local low of around 2,729 on Monday. Then the market broke above the month-long downward trend line and it kept retracing the late May decline. Will it get back to the record high? There have been no confirmed negative signals so far. However, we saw some short-term overbought conditions.
Concluding, the S&P 500 index will likely open slightly higher today. Then we could see more short-term fluctuations following the recent rally.
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Thank you.
Paul Rejczak
Stock Trading Strategist
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