S&P 500 Continues Retracing Monday's Sell-Off, Upward Reversal?

The U.S. stock market indexes gained 0.5-1.1% on Wednesday, retracing some more of their Monday's decline, as investors' sentiment slightly improved. The S&P 500 index fell the lowest since late March, and it got very close to the 2,800 mark (daily low at 2,801.43) on Monday. It currently trades 3.4% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average gained 0.5% and the Nasdaq Composite gained 1.1% on Wednesday.

The nearest important resistance level of the S&P 500 index is at around 2,850-2,860, marked by the recent local low. The resistance level is also at 2,880-2,900. On the other hand, the support level is at 2,800-2,820. The support level is also at around 2,785, marked by some previous local lows.

The broad stock market retraced all of its December sell-off and it broke above the last year's high recently. But then the index broke below the short-term consolidation and it retraced all of the April's advance. The market also broke below its two-month-long upward trend line, as we can see on the daily chart:

More Short-Term Fluctuations

Expectations before the opening of today's trading session are positive because the index futures contracts trade 0.3-0.4% above their Wednesday's closing prices. The European stock market indexes have gained 0.3-0.8% so far. Investors will wait for some economic data announcements today: Housing Starts, Building Permits, Philly Fed Manufacturing Index, Unemployment Claims at 8:30 a.m.

The broad stock market will likely extend its short-term consolidation following Monday's sell-off. The index bounced off a 2,800 support level on Monday, and then it reached the 2,850-2,860 level on Tuesday and yesterday. So was it an upward reversal or just correction before another leg down? For now, it looks like a correction. But if the market breaks above the resistance level of around 2,890, we could see more buying pressure.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces more of its Monday's decline. The nearest important level of resistance is at around 2,880-2,890. On the other hand, the support level is at 2,850, among others. The futures contract is now above its yesterday's local high, as the 15-minute chart shows:

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Disclosure: None.

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