Stocks Rallied Again, Still Just An Upward Correction?

The U.S. stock market indexes gained 3.3-4.3% on Friday, as investors reacted to better-than-expected Nonfarm Payrolls number release. The S&P 500 index extended its recent rebound off the December the 26th medium-term low of 2,346.58. It traded 20.2% below September the 21st record high of 2,940.91 on that day. Then the market rallied and retraced some of the downtrend. It got back above 2,500 mark on Friday. The Dow Jones Industrial Average gained 3.3% and the Nasdaq Composite gained 4.3%.

The nearest important level of resistance of the S&P 500 index is now at 2,530-2,550, marked by some previous fluctuations. The resistance level is also at 2,570-2,600. On the other hand, the level of support is at 2,500, and the next support level remains at 2,450-2,475, marked by some recent local lows.

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. The downward correction reached 20.2% 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 remains below the recent consolidation, as we can see on the daily chart:

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

Consolidation Following Friday's Rally

Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade between -0.2% and +0.1% vs. their Friday's closing prices. The European stock market indexes have lost 0.6% so far. Investors will wait for the ISM Non-Manufacturing PMI number release at 10:00 a.m. The broad stock market may fluctuate following its Friday's rally. For now, it looks like another consolidation following the recent rebound.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of the Friday's rally. The nearest important level of support is at 2,500-2,510, marked by the recent resistance level. On the other hand, the level of resistance is now at 2,550, marked by the local high. The futures contract is close to the short-term upward trend line, as the 15-minute chart shows:

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Disclosure: None.

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