Wednesday's trading session was virtually flat, as investors hesitated following the recent run-up. Will the broad stock market continue higher despite some clear short-term technical overbought conditions?
The U.S. stock market indexes were mixed between 0.0% and +0.2% on Wednesday, as investors sentiment remained bullish despite some clear short-term technical overbought conditions. The S&P 500 index retraced more of its October-December downward correction of 20.2% (2,713.88) recently. It got closer to the previous local highs along the 2,800 level. The Dow Jones Industrial Average gained 0.2% and the Nasdaq Composite was unchanged on Wednesday.
The nearest important resistance level of the S&P 500 index remains at around 2,785-2,800, marked by the previous medium-term local highs. On the other hand, the support level is at around 2,760, marked by the Friday's daily gap up of 2,757.90-2,760.24. The support level is also at 2,720, marked by the last Tuesday's daily gap up of 2,718.05-2,722.61.
The broad stock market retraced almost all of its December sell-off and it got closer to the medium-term resistance level of around 2,800, marked by the October-November local highs. So is it still just a correction or a new medium-term uptrend? The market broke above the 61.8% Fibonacci retracement of the 20% decline. And we may see an attempt at getting back to the record highs. But will the index break above the mentioned previous local highs? There have been no confirmed negative signals so far:
S&P 500 Just below 2,800
Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade between 0.0% and +0.1% vs. their yesterday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for series of economic data announcements today: Durable Goods Orders, Philadelphia Fed Manufacturing Index, Initial Claims at 8:30 a.m., Flash Manufacturing PMI at 9:45 a.m., CB Leading Index, Existing Home Sales at 10:00 a.m., Crude Oil Inventories at 11:00 a.m. The broad stock market will likely continue to fluctuate following its last week's rally. We may see some more uncertainty, as the market remains close to the medium-term resistance level.
The S&P 500 futures contract trades within an intraday consolidation, after retracing its yesterday's intraday advance. The nearest important level of resistance is at around 2,790-2,800, marked by the short-term local highs. On the other hand the support level is at 2,770-2,780, among others. The futures contract is above its two-day-long upward trend line, as we can see on the 15-minute chart:
Nasdaq Remains Close to Local Highs
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market gained almost 1,300 points from December the 26th local low of around 5,820. The nearest important resistance level is now at 7,100-7,150. The support level is at 6,950-7,000, among others. The Nasdaq futures contract remains slightly below 7,100 level, as the 15-minute chart shows:
Apple, Amazon - No Big Changes
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). Apple released its quarterly earnings recently. Then the stock broke above the recent trading range and the resistance level of $155-160. It retraced some more of its November-December sell-off. But then it bounced off $175, retracing some of the recent advance. It still looks like a short-term correction:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The market broke above one of its three-month-long downward trend lines more than a month ago. Since then it has been going sideways. There is a resistance level at around $1,700-1,750. Recently it bounced off that resistance level following the quarterly earnings release. The stock got closer to the downward trend line again, but then it came back slightly lower again. Overall, it looks like a sideways trend:
Dow Jones Marginally Higher Again
The Dow Jones Industrial Average slightly extended its short-term uptrend again yesterday. The blue-chip stocks' gauge is at the resistance level of 25,500-26,000. So will it continue higher and reach the record high? Or reverse lower in the near term? There have been no confirmed negative signals so far:
Japanese Nikkei Also Higher
Let's take a look at the Japanese Nikkei 225 index. It accelerated the downtrend in late December, as it fell slightly below the level of 19,000. Since then it has been retracing the downtrend. Recently the market broke above its recent local highs and the 21,000 resistance level. The next important resistance level is at 21,600-22,000, marked by the December consolidation:
The S&P 500 index extended its short-term uptrend again yesterday, as it got closer to the medium term resistance level of around 2,800. Is this a new medium-term uptrend or still just upward correction before another medium-term leg lower? The market trades above the 61.8% Fibonacci retracement of the whole medium-term decline. There have been no confirmed negative signals so far.
Concluding, the S&P 500 index will likely open virtually flat today. We may see some more consolidation following the recent rally. There are still short-term technical overbought conditions.
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Paul Rejczak Stock Trading Strategist Sunshine Profits - Effective Investments through Diligence and Care
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