From Panic To Euphoria - Upward Reversal Or Just Correction?

The U.S. stock market indexes gained 5.0-5.8% on Wednesday, as they retraced their Monday's sell-off and got above last Friday's closing prices. The S&P 500 index fell the lowest since the late April of 2017 and it traded 20.2% below September the 21st record high of 2,940.91 yesterday. The daily low was at 2,346.58. Then the market rallied and closed 16.1% below the mentioned record high. The Dow Jones Industrial Average gained 5.0% and the Nasdaq Composite gained 5.8% on Wednesday.

The nearest important level of resistance of the S&P 500 index is now at around 2,500, marked by the recent local highs. The resistance level is also at 2,530. On the other hand, the support level is at 2,400-2,420, among others.

The broad stock market broke below its two-month-long trading range recently, as the S&P 500 index fell below the level of 2,600. Then the market accelerated lower and it broke below the level of 2,400 on Monday. The downward correction reached 20% from the September all-time high, surpassing January-February correction of around 12%. Is this a long-term bear market? It still looks like a medium-term downward correction, but the index is now way below the recent consolidation, as we can see on the daily chart:

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

Negative Expectations, Just Short-Term Downward Correction?

The index futures contracts trade between 1.5-1.6% below their Wednesday's closing prices. So expectations before the opening of today's trading session are negative. The European stock market indexes have lost 0.2-1.7% so far. Investors will wait for some economic data announcements today: Initial Claims at 8:30 a.m., Consumer Confidence number at 10:00 a.m. The broad stock market may fluctuate following its yesterday's rally. It will likely retrace some of the advance at the opening of today's trading session, but then we may see attempts at getting back higher. For now, it looks like an upward correction within a downtrend.

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