The main U.S. stock market indexes were mixed between -0.9% and -0.0% on Wednesday, as investors hesitated following Tuesday’s sell-off. The sentiment remained pretty bearish despite some better-than-expected economic data releases. The S&P 500 index fluctuated along the level of 2,600. It is currently 9.4%  below January 26 record high of 2,872.87. The Dow Jones Industrial Average lost just 0.05%, and the technology Nasdaq Composite lost 0.9% on Wednesday, following its Tuesday’s sell-off of 3.3%.

The nearest important level of resistance of the S&P 500 index is at around 2,630-2,635, marked by yesterday’s daily high The next resistance level remains at 2,650-2,670, marked by previous consolidation and short-term local highs. The resistance level is also at 2,690-2,710, marked by March 22 daily gap down of 2,695.68-2,709.79. On the other hand, the nearest important support level is at 2,585-2,600, marked by recent local lows.

We can see that stocks reversed their medium-term upward course following the whole retracement of January euphoria rally. Then the market bounced off its almost year-long medium-term upward trend line, and it retraced more than 61.8% of the sell-off within a few days of trading. Since then it was fluctuating, and now it is trading close to its upward trend line again. There are two possible future scenarios. The bearish case leading us to February low or lower after breaking below medium-term upward trend line, and the bullish one with medium-term double top pattern or breakout higher. Last week’s sell-off made the bearish case much more likely, almost a certainty. Monday’s rally gave bulls another chance, but Tuesday’s sell-off took it away. You should take notice of a breakdown below potential rising wedge pattern. This over month-long trading range looks like an upward correction following late January – early February sell-off:

Positive Expectations

The index futures contracts trade 0.3-0.6% higher vs. their yesterday’s closing prices, so expectations before the opening of today’s trading session are positive. The European stock market indexes have gained 0.4-0.8% so far. Investors will wait for some economic data announcements today: Personal Income, Personal Spending, Initial Claims at 8:30 a.m., Chicago PMI at 9:45 a.m., Michigan Sentiment number at 10:00 a.m. The market will probably extend its short-term consolidation, but the volatility may come down after yesterday’s sideways action and ahead of long holiday weekend. However, if the index breaks lower, it could continue towards February 9 low of 2,532.69.

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