The U.S. stock market indexes gained between 0.4% and 0.8% on Friday, as investors' sentiment improved once again. The S&P 500 index retraced more of its October-December downward correction of 20.2% a week ago on Monday. Then it fluctuated close to the previous local highs along the 2,800 level. The Dow Jones Industrial Average gained 0.4% and the Nasdaq Composite gained 0.8% on Friday.
The nearest important resistance level of the S&P 500 index remains at around 2,800-2,820, marked by the previous medium-term local highs. On the other hand, the support level is at around 2,765-2,780, marked by the recent local lows. The support level is also at the previous daily gap up of 2,757.90-2,760.24.
The broad stock market retraced all of its December sell-off and it got close 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:
Positive Expectations Again
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.4-0.8% above their Friday's closing prices. The European stock market indexes have gained 0.3-0.8% so far. There will be no new important economic data announcements today. The broad stock market will likely extend its short-term uptrend. However, we may see some short-term uncertainty as the market remains close to the mentioned medium-term local highs.
The S&P 500 futures contract trades within an intraday consolidation following an overnight advance. The nearest important level of resistance is at around 2,815-2,820. On the other hand, the support level is at 2,795-2,800. The futures contract is now above the 2,800 mark, as the 15-minute chart shows:
Nasdaq at New High
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market gained almost 1,400 points from December the 26th local low of around 5,820. The nearest important resistance level is at around 7,200-7,250, marked by some previous local highs. The support level is at 7,100-7,150, marked by the recent resistance level. The Nasdaq futures contract trades at the new short-term local high, as we can see on the 15-minute chart:
Big Cap Tech Stocks Breaking Higher?
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke above its January's trading range and the resistance level of $155-160 following the quarterly earnings release. It retraced some more of its November-December sell-off. But then it bounced off $175. Last week the market came back to the local high but then we saw some sideways action. There have been no confirmed negative signals so far:
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 two months 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 on Friday. Overall, it still looks like a sideways trend:
Dow Jones Remains Close to 26,000
The Dow Jones Industrial Average extended its short-term uptrend a week ago, but then it retraced that advance. Since then it has been going sideways. So will it continue even higher and reach the record high? Or reverse lower in the near term? There have been no confirmed negative signals so far:
Nikkei Advancing Today
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 local highs and the 21,000 resistance level. The next important resistance level is at 21,800-22,000, marked by the December consolidation. Today the index broke above its recent trading range:
The S&P 500 index extended its run-up a week ago. It is now at 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 higher today. We may see an attempt at breaking above the recent trading range. However, we still can see some short-term technical overbought conditions.
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Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
