Short-Term Upward Reversal Or Just A Bounce?

The U.S. stock market indexes lost 0.1-0.2% on Friday, as investors continued to take profits off the table following two-month-long advance. The S&P 500 index retraced more of its October-December downward correction of 20.2% a week ago, before reversing lower and getting back below the 2,800 level. The market fluctuated close to the previous medium-term local highs and then it retraced most of its February's advance. The Dow Jones Industrial Average lost 0.1% and the Nasdaq Composite lost 0.2% on Friday.

The nearest important resistance level of the S&P 500 index is now at around 2,765-2,770, marked by the Thursday's daily gap down of 2,767.25-2,768.69 and the recent local lows. The resistance level is also at 2,800-2,820, marked by the medium-term local highs. On the other hand, the support level is at 2,730, marked by the mid-February local low. The next support level is at around 2,720, marked by February the 11th daily gap up of 2,718.05-2,722.61 and the Friday's daily low.

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. However, the index broke below the two-month-long upward trend line on Thursday:

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

Slightly Positive Expectations

Expectations before the opening of today's trading session are slightly positive because the index futures contracts trade 0.1-0.2% above their Friday's closing prices. The European stock market indexes have gained 0.3-0.4% so far. Investors will wait for some economic data announcements today: Retail Sales number at 8:30 a.m., Business Inventories at 10:00 a.m. The broad stock market will likely retrace some of its recent decline. However, we may see some more uncertainty, as stocks get closer to their previous local lows.

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Disclosure: None.

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