The U.S. stock market indexes gained 0.5-1.0% on Wednesday, extending their short-term uptrend, as investors' sentiment remained slightly bullish after the Monday's rebound off the new medium-term low of 2,583.23. The S&P 500 index traded 12.2% below September the 21st record high of 2,940.91. It is currently 9.8% below the all-time high. The Dow Jones Industrial Average gained 0.6% and the Nasdaq Composite gained 1.0% on Wednesday.
The nearest important level of resistance of the S&P 500 index is at around 2,675-2,685, marked by some recent fluctuations. The resistance level is also at 2,695-2,700, marked by last Thursday's daily gap down of 2,696.15-2,697.18. On the other hand, the support level is now at 2,630-2,650. The level of support is also at 2,580-2,600, marked by the medium-term local lows.
The broad stock market reversed its recent upward course following the S&P 500 index' reversal off the resistance level at 2,800. On Thursday a week ago the market broke below 2,700 mark, as it retraced more of the rally. On Monday it fell the lowest since the early April, before bouncing off and getting above 2,600 mark at the end of the day. The index continues to trade above its previous medium-term lows, as we can see on the daily chart:
Mixed Expectations
The index futures contracts trade between -0.3% and +0.1% vs. their yesterday's closing prices. So expectations before the opening of today's trading session are slightly negative to virtually flat. The main European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: the ECB Rate Decision at 7:45 a.m., Initial Claims at 8:30 a.m. The broad stock market will likely continue to fluctuate following its Monday's rebound. We may see another attempt at breaking above the short-term resistance levels. It still looks like a volatile medium-term consolidation following the October decline despite Monday's sell-off below 2,600 mark.
The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of its overnight advance. The nearest important resistance level is at around 2,675-2,685. On the other hand, the support level is at 2,630-2,650, among others. The futures contract extends its short-term fluctuations, as the 15-minute chart shows:
Nasdaq Below 6,800 Mark
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. The market fell closer to its late November lows on Monday. It was relatively stronger than the broad stock market, as it didn't reach a new medium-term low. Then the tech stocks' gauge gained more than 300 points. The nearest important resistance level remains at 6,800-6,850. On the other hand, the support level is at 6,650-6,700, among others. The Nasdaq futures contract broke slightly below its short-term upward trend line this morning, as we can see on the 15-minute chart:
Apple, Amazon - Going Sideways
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock extended its sell-off on Monday, following Friday's breakdown below the price of $170. It reached the new medium-term low of $163.33. Then the market got back to $170. So was it a panic bottom before an upward reversal? There have been no confirmed positive signals so far. But we still can see technical oversold conditions:
Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It remains relatively stronger, as it still trades way above the November low. The stock bounced off $1,600 on Thursday, but it failed to continue higher on Friday. The resistance level remains at $1,750-1,800, marked by some previous local highs. The stock continues to trade slightly below its two-month-long downward trend line, as we can see on the daily chart:
Dow Jones Also Fluctuating
The Dow Jones Industrial Average got closer to 26,000 mark last week, as it accelerated its short-term uptrend, but then it quickly reversed lower. We saw more downward action on Thursday, as the index fell to around 24,250, before bouncing off to 25,000 again. On Friday, the blue-chip stocks' gauge fell closer to the support level again. And on Monday, it fell below 24,000 before bouncing off and closing virtually flat. It looks like a short-term upward reversal, but there have been no confirmed positive signals so far:
Japanese Nikkei - Back to 22,000 Mark
Let's take a look at the Japanese Nikkei 225 index. It broke slightly below its two-month-long upward trend line on Monday, but then it reversed higher on Tuesday and continued the uptrend on Wednesday and today. We can see the medium-term consolidation along the level of 22,000:
The S&P 500 index fell the lowest since the early April on Monday following last week's failed rally to 2,800 mark. It reversed its intraday downward course after bouncing off the support level of around 2,580-2,600. Will it continue higher? Or was it just an upward correction before another leg lower and a real breakdown below the medium-term local lows? There have been no confirmed positive signals so far. The broad stock market continues to trade within its two-month-long consolidation.
Concluding, the S&P 500 index will likely open slightly negative to virtually flat today. We may see more short-term volatility, as the market gets closer to its recent local highs.
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Paul Rejczak
Stock Trading Strategist
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