Downward Reversal? Stocks Still Relatively Close To Their Recent Highs

The U.S. stock market indexes lost 0.5-0.9% on Wednesday, retracing their Tuesday's advance, as investors took some short-term profits off the table. The S&P 500 index retraced more of its October-December downward correction of 20.2% on Monday, before reversing its intraday advance and getting back below the 2,800 level. The market continued to fluctuate close to the previous medium-term local highs. The Dow Jones Industrial Average lost 0.5% and the Nasdaq Composite lost 0.9% on Wednesday.

The nearest important resistance level of the S&P 500 index remains at 2,800-2,820, marked by the medium-term local highs. On the other hand, the support level is at around 2,765-2,770, 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:

Daily S&P 500 index chart - SPX, Large Cap Index

 

Short-Term Downtrend or Still a Correction

Expectations before the opening of today's trading session are slightly negative, because the index futures contracts trade 0.2% below their yesterday's closing prices. The European stock market indexes have lost 0.3-0.4% so far. Investors will wait for some economic data announcements today: Initial Claims, Revised Nonfarm Productivity at 8:30 a.m. The broad stock market will likely extend its short-term downward correction today. We may see some more uncertainty as the market remains close to the mentioned medium-term local highs.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following its yesterday's decline. The nearest important level of resistance is at around 2,780, marked by the recent local low. On the other hand, the support level is at 2,760-2,665, among others. The futures contact trades along its Monday's local low this morning, as the 15-minute chart shows:

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Disclosure: None.

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