The U.S. stock market indexes lost 0.4-1.0% on Friday, retracing some of their recent advance, as investors' sentiment worsened again. On Monday a week ago the S&P 500 index fell the lowest since late March, and it got very close to the 2,800 mark (daily low at 2,801.43). Then it rebounded to the resistance level of around 2,890-2,900. It currently trades 3.2% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average lost 0.4% and the Nasdaq Composite lost 1.0% on Friday.
The nearest important resistance level of the S&P 500 index remains at 2,880-2,900, marked by the previous support level. The resistance level is also at 2,920-2,930. On the other hand, the support level is at 2,850. The support level is also at around 2,800-2,820, marked by the recent local lows.
The broad stock market retraced all of its December sell-off and it broke above the last year's high recently. But then the index broke below the short-term consolidation and it retraced all of the April's advance. The market also broke below its two-month-long upward trend line. Last week the S&P 500 index retraced some of its recent declines. For now, it looks like an upward correction:
Negative Expectations
Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.5-1.2% below their Friday's closing prices. The European stock market indexes have lost 1.0-1.5% so far. There will be no new important economic data announcements today. However, the market will await the Fed Chair Powell speech at 7:00 p.m.
The broad stock market will likely continue its Friday's intraday decline today. It bounced off the resistance level on Friday and it retraced some of its recent advance. The recent rally looked like an upward correction of a new downtrend. If the market breaks below the support level of around 2,820, we could see more selling pressure.
The S&P 500 futures contract trades within an intraday downtrend, as extends its Friday's decline. The nearest important level of resistance is now at around 2,860-2,870, marked by the recent local highs. On the other hand, the support level is at 2,840, among others. The futures contract gets closer to the week-long upward trend line, as we can see on the 15-minute chart:
Nasdaq Also Lower
The technology Nasdaq 100 futures contract follows a similar path, as it extends its short-term downtrend. The market fell almost 600 points from its late April record high of around 7,880, before bouncing off the 7,300 mark a week ago. It retraced more than 300 points from that local low. But then it reversed its upward course again. The resistance level is now at around 7,500, marked by the recent local lows. On the other hand, the support level is at 7,300-7,350. The Nasdaq futures contract trades below its short-term downward trend line, as the 15-minute chart shows:
Big Cap Tech Stocks - Mixed Picture
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 its upward course and broke below the medium-term upward trend line. Since last week's Monday it fluctuates along the short-term resistance level of $190:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock accelerated its uptrend in the late April, as it reached the new record high of $131.37. Investors reacted to a better-than-expected quarterly earnings release. Since then, the market was trading within a downward correction. On Friday it got back closer to the resistance level of $130-132:
Dow Jones Still Above its 200-day Moving Average
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. Last week the blue-chip stocks' gauge followed the broad stock market, as it accelerated the downtrend. But then the market bounced off the 25,500 mark, and at its important 200-day moving average:
Nikkei Bouncing Off 21,000
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 several months. Recently the market broke below its three-month-long upward trend line, but then it came back to that broken trend line:
The S&P 500 index has reached the new record high on May the 1st. The broad stock market extended its medium-term uptrend, as investors' sentiment remained very bullish following economic data, quarterly corporate earnings releases. But then it quickly retraced its April's advance following the renewed trade war fears. A week ago it sold off to the 2,800 mark. Since then it is trading within a short-term uptrend. For now, it looks like an upward correction.
Concluding, the S&P 500 index will likely open lower today and it may retrace more of the Wednesday's-Thursday's rally. For now, it looks like an upward correction following the recent declines.
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Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
