The main U.S. stock market indexes were mixed between -0.3% and +1.1% vs. their Thursday's closing prices on Friday, following lower opening of the trading session and an intraday bounce off support levels. The S&P 500 index closed 0.5% higher, and it is currently trading 6.3% below January 26 record high of 2,872.87. The Dow Jones Industrial Average lost 0.3%, as it was relatively weaker than the broad stock market again and the technology Nasdaq Composite gained 1.1% on Friday.
The nearest important level of resistance of the S&P 500 index is at around 2,700, marked by previous consolidation. The next resistance level remains at 2,750, marked by short-term local highs. On the other hand, support level remains at 2,740-2,750, marked by local low. On Friday we wrote: "If the market continues lower, potential level of support would be at 2,640-2,650, marked by previous short-term consolidation". The index did bounce off that support level, as it set its Friday's daily low at 2,647.32.
The S&P 500 index reached its record high 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. Last week's move down made the bearish case more likely. However, the most likely scenario may be that stocks go sideways for a while:
The index futures contracts trade between -0.2% and +0.1% vs. their Friday's closing prices, so investors' expectations before today's cash market open are virtually flat. However, the market bounced off its overnight lows. The European stock market indexes have gained 0.2-0.5% so far. Investors will now wait for the ISM Non-Manufacturing PMI number release at 9:45 a.m., It looks like stocks may trade within a short-term consolidation this morning. Is this some bottoming pattern or just consolidation before another leg lower? It's hard to say, but the market keeps bouncing off the support level at around 2,650.
The S&P 500 futures contract is within an intraday uptrend, as it retraces its overnight move down. The nearest important level of resistance is at 2,690-2,700, marked by local highs. On the other hand, support level remains at 2,645-2,650, among others. The futures contract trades at its short-term downward trend line, as we can see on the 15-minute chart: