Yesterday's trading session brought the main U.S. stock market indexes 0.8-1.5% down, as investors' sentiment worsened following Tuesday's downward reversal. Stocks broke above their short-term consolidation on Monday, but they failed to continue higher. Consequently, they fell into their last week's consolidation and the S&P 500 index got closer to 2,700 mark again. Stocks are expected to open lower today, but they may retrace some of their two-day-long sell-off. Where is a potential support level?
Stocks extended their Tuesday's move down yesterday, as the main U.S. stock market indexes lost 0.8-1.5% vs. their Tuesday's closing prices. Investors' sentiment worsened and the market got back to its last week's trading range. The S&P 500 index fell closer to 2,700 mark again. It currently trades 5.5% below January 26 record high of 2,872.87. The Dow Jones Industrial Average lost 1.5% yesterday, as it was relatively weaker than the broad stock market gauge. On the other hand, the technology Nasdaq Composite lost 0.8% yesterday. Tech stocks were relatively stronger than the rest.
The nearest important level of resistance of the S&P 500 index is now at around 2,750-2,760 again, marked by local high. The next resistance level remains at 2,790-2,800, marked by short-term local highs. On the other hand, support level is at around 2,700, marked by last week's local lows. If the market continues lower, potential level of support would be at 2,670, marked by previous local highs.
The S&P 500 index reached its record high more than 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 January euphoria rally.
Then 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? The market seems to be in the middle of two possible future scenarios. The bearish case leads us to February low or lower after breaking below medium-term upward trend line, and the bullish one means potential double top pattern or breakout above the late January high. However, the most likely scenario may be that stocks go sideways for a while:
Negative Expectations Before the Open
The index futures contracts are trading 0.3-0.4% lower vs. their Wednesday's closing prices right now. The European stock market indexes have lost 0.8-1.1% so far. It means that investors' expectations ahead of the opening of trading session are negative, and stocks may extend their recent downtrend. But will they continue lower? We may see upward correction at some point. Investors will wait for some economic data announcements today: Personal Income, Personal Spending, Initial Claims at 8:30 a.m., ISM Manufacturing PMI number at 10:00 a.m.
The S&P 500 futures contract is within an intraday consolidation, following yesterday's move down. For now, it looks like some flat correction within a short-term downtrend. The nearest important level of support is at around 2,690-2,700. On the other hand, resistance level is at 2,720, and the next level of resistance remains at 2,740-2,760, marked by recent consolidation. The futures contract trades below its short-term downward trend line, as the 15-minute chart shows: