Stocks rallied on Friday, but they remained within their week-long consolidation. Which direction is next? Will bulls drive prices higher this week? Or will Friday's move up fade today? The S&P 500 index continues to trade along the level of 2,700-2,750, and it is still around 4.4% below its late January all-time high. Stocks are expected to open higher today, but will they continue upwards after 9:30 a.m.?
The main U.S. stock market indexes went 1.4-1.8% higher in Friday's trading session, as investors' sentiment improved following week-long fluctuations after previous week's rally off February 9 lows. The S&P 500 index got close to its recent local highs and it currently trades around 4.4% below January 26 record high of 2,872.87. It retraced more than 61.8% of its late January - early February sell-off (retracement level at 2,742.92). The Dow Jones Industrial Average gained 1.4%, and the technology Nasdaq Composite gained 1.8% on Friday.
The nearest important level of resistance of the S&P 500 index remains at around 2,750, marked by recent local highs. The resistance level is also at 2,760-2,765. On the other hand, support level is at 2,700, marked by local lows. If the market continues higher, potential resistance level would be at around 2,800-2,810, marked by the late January short-term consolidation.
The S&P 500 index reached its record high almost a month ago on January 26. It broke below month-long upward trend line, as it confirmed uptrend's reversal. Then the broad stock market gauge retraced all of its January rally and continued lower. The index extended its downtrend on February 9, as it was almost 12% below the late January record high. We can see that stocks reversed their medium-term upward course following whole retracement of last month's euphoria rally. However, the market bounced off its almost year-long medium-term upward trend line, and it retraced more than 61.8% of the sell-off within a few days of trading. Is this just an upward correction or uptrend leading to new all-time highs? It still looks like an upward correction, but the index is much closer to breaking above its short-term consolidation:
Positive Expectations Again
The index futures contracts gain 0.3-0.6% vs. their Friday's closing prices this morning. It means that investors' expectations ahead of the opening of trading session are positive again. The European stock market indexes have gained 0.3-0.5% so far. Investors will wait for the New Home Sales number release at 10:00 a.m. Will the market continue higher after the opening of cash market's trading session? The S&P 500 index is expected to break above its week-long consolidation today, unless sentiment worsens before 9:30 a.m.
The S&P 500 futures contract trades within an intraday uptrend, as it extends its Friday's advance. It broke above the resistance level of 2,750. The next important level of resistance is at around 2,780-2,800, among others. On the other hand, support level remains at around 2,745, marked by some short-term local lows. There is also a support level of 2,735-2,740, marked by last week's local highs. The futures contract trades above its upward trend line, as we can see on the 15-minute chart: