Sentiment Improves - Upward Reversal Or Just Another Bounce?

The U.S. stock market indexes lost 0.5-0.7% on Friday, as investors' sentiment remained bearish following the recent declines. The S&P 500 index fell slightly below its Tuesday's local low. It got closer to the late October low of 2,603.54. The index is currently trading 10.6% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average lost 0.7% and the Nasdaq Composite lost 0.5% on Friday.

The nearest important level of resistance of the S&P 500 index is now at 2,645-2,650, marked by Friday's daily gap down of 2,647.55-2,649.82. The next resistance level is at 2,670-2,680, marked by Tuesday's daily gap down of 2,669.44-2,681.09. The resistance level is also at 2,690-2,700, marked by the previous level of support. On the other hand, the level of support is at 2,600-2,630, marked by the late October lows, among others.

The broad stock market got closer to its late October low once again. The S&P 500 index trades around 10% below the record high. So will the downtrend continue? Or is this a bottoming pattern before an upward reversal? There have been no confirmed positive signals so far. The market continues to trade below its long-term upward trend line, as we can see on the daily chart:

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

 

Positive Expectations

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 1.1-1.6% above their Friday's closing prices. The European stock market indexes have gained 0.9-1.3% so far. There will be no new important economic data releases today. The broad stock market will likely retrace some of its last week's sell-off. For now, it looks like an upward correction within a downtrend.

The S&P 500 futures contract trades within an intraday uptrend. The nearest important level of resistance is at around 2,660-2,665, marked by the recent local highs. The next resistance level is at 2,680-2,700. On the other hand, the level of support is at 2,630-2,640, marked by the recent consolidation. The futures contract extends its short-term consolidation, as we can see on the 15-minute chart:

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Disclosure: None.

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