Stocks Going Sideways - Which Direction Is Next?

The U.S. stock market indexes were mixed between -0.2% and +0.5% on Friday, extending their short-term fluctuations, as investors continued to hesitate following last week's sell-off. The S&P 500 index remains above 2,700 mark after bouncing off the support level on Wednesday-Thursday. The index was 11.5% below September the 21st record high of 2,940.91 three weeks ago. And now it trades 7.0% below the all-time high. The Dow Jones Industrial Average gained 0.5% and the Nasdaq Composite lost 0.2% on Friday.

The nearest important level of resistance of the S&P 500 index remains at around 2,750-2,775, marked by the recent support level and the short-term local highs. The next resistance level is at 2,795-2,800, marked by Friday's daily gap down of 2,794.10-2,794.99, among others. The resistance level is also at 2,815-2,820, marked by the mid-October local high of 2,816.94. On the other hand, the support level remains at 2,700, marked by the previous short-term consolidation. The next support level is at 2,685, marked by the late October daily gap up. The support level is also at 2,600-2,630, marked by the late October lows.

The broad stock market extended its downtrend three weeks ago, as the S&P 500 index fell closer to 2,600 mark. Since then it fluctuates within a relatively wide trading range following the recent advance above the level of 2,800. On Wednesday and on Thursday the index fell below 2,700 and it is trading close to the long-term upward trend line again:

(Click on image to enlarge)

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

Short-Term Consolidation

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.4% below their Friday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for the NAHB Housing Market Index release at 10:00 a.m. The broad stock market will likely continue its short-term fluctuations this morning. We may see another attempt at breaking above the resistance level. However, there have been no confirmed short-term positive signals so far.

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Disclosure: None.

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