The U.S. stock market indexes lost 0.8-0.9% on Wednesday, extending their short-term downtrend, as investors' sentiment remained bearish following last week's Thursday's - Friday's downward reversal. The S&P 500 index broke below 2,700 yesterday, before closing at that support level. The index was 11.5% below September the 21st record high of 2,940.91 two weeks ago. And now it trades 8.3% below the all-time high. The Dow Jones Industrial Average lost 0.8% and the Nasdaq Composite lost 0.9% on Wednesday.
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. 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 mid-October local high of 2,816.94. On the other hand, the support level is 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 around two weeks ago, as the S&P 500 index fell closer to 2,600 mark. Then it bounced sharply and accelerated higher. On Wednesday we wrote that if the index breaks above 2,750, we could see more buying pressure. And the market got back above the broken long-term upward trend line. It was also back above 2,800 mark again. Then the index bounced off its mid-October local high and quickly reversed the uptrend. It sold off on Monday, as big cap tech stocks led the way lower. Yesterday the index fell below 2,700 and it is below the long-term upward trend line again:
Positive Expectations Again
Expectations before the opening of today's trading session are positive, because the index futures contracts trade between +0.3% and +0.6% 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: Retail Sales, Philadelphia Fed Manufacturing Index, Empire State Manufacturing Index, Initial Claims at 8:30 a.m., Business Inventories at 10:00 a.m., Crude Oil Inventories at 11:00 a.m. The broad stock market will likely retrace some of its yesterday's decline. We may see another attempt at bouncing off the support 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 extends its fluctuations along 2,700 mark. The nearest important level of support is at around 2,685, marked by the short-term local low. On the other hand, the resistance level is at 2,715-2,720, among others. The futures contract trades within a short-term consolidation, as the 15-minute chart shows:
Nasdaq Remains Close to 6,800
The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates after slightly extending its recent decline. The market accelerated the short-term downtrend following breaking below 7,000 mark recently. The nearest important support level is at 6,750-6,800. On the other hand, the resistance level is now at 6,850-6,900. The Nasdaq futures contract continues to trade below its short-term downward trend line, as we can see on the 15-minute chart
:
Another Apple's Sell-Off
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It accelerated its downtrend on Monday 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 an attempt 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. Yesterday the stock retraced some more of its recent advance. For now, it looks like a downward correction:
Dow Jones Also Lower
The Dow Jones Industrial Average has also extended its short-term downtrend. It fell slightly below the level of 25,000, before bouncing off that support level. 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 25,000:
Japanese Nikkei - Short-Term Consolidation
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 on Friday 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 at the October the 25th daily gap down:
The S&P 500 index fell below the level of 2,700 yesterday, as it extended its short-term downtrend. The market may continue to fluctuate within a volatile month-long consolidation after the late October sell-off. The broad stock market index trades within a potential support level of the October the 31st daily gap up.
Concluding, the S&P 500 index will probably open higher today, as investors' sentiment slightly improves ahead of economic data releases. For now it looks like consolidation within a downtrend. We may see some more short-term volatility.
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Paul Rejczak
Stock Trading Strategist
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