Bulls happier again, but...
Bulls regained their strength on Wednesday, as stocks retraced Monday's sell-off following lower opening of the trading session. The S&P 500 index extends its short-term consolidation despite trade war, interest rate hikes fears. So, is medium-term bullish case valid again?
The U.S. stock market indexes gained 1.0-1.5% on Wednesday, following much lower opening of the trading session, as investors' sentiment improved after rebounding off recent local lows. The broad stock market broke above the level of 2,600 again and got closer to 2,650 mark. The S&P 500 index trades 7.9% below January 26 record high of 2,872.87. The Dow Jones Industrial Average gained 1.0%, and the technology Nasdaq Composite gained 1.5%, as big cap tech stocks were relatively stronger than the broad stock market yesterday.
The nearest important level of resistance of the S&P 500 index is now at around 2,650, marked by previous local high. The next resistance level is at 2,660-2,675. There is also a resistance level at 2,695-2,710, marked by March 22 daily gap down of 2,695.68-2,709.79. On the other hand, level of support is at 2,620, marked by Tuesday's daily high. The next important support level is at 2,575-2,600.
We can see that stocks reversed their medium-term upward course following the 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. The uptrend reversed in the middle of March, and then stocks retraced almost all of their February - March rebound. The most likely scenario right now is still bearish one, leading us to February low or lower after breaking below medium-term upward trend line. The bullish case is a medium-term double top pattern or breakout higher. Previous week's sell-off made the bearish case much more likely, almost a certainty. Last week's Monday's rally gave bulls another chance, but Tuesday's sell-off took it away. Stocks broke below their short-term consolidation on Monday, but they rebounded on Tuesday and they retraced most of their recent losses yesterday. So, is bullish case more likely now? There have been no confirmed positive signals so far. You should take notice of a breakdown below rising wedge pattern. This over month-long trading range was an upward correction following late January - early February sell-off:
Uptrend May Extend
The index futures contracts trade 0.2-0.6% higher vs. their yesterday's closing prices. So, expectations before the opening of today's trading session are positive. The main European stock market indexes have gained 1.3-1.8% so far. Investors will wait for some economic data announcements today: Initial Claims, Trade Balance at 8:30 a.m. The market will probably extend yesterday's move up slightly. Will the index break above its short-term consolidation? Probably not. We may see some uncertainty ahead of tomorrow's monthly jobs data release.
The S&P 500 futures contract trades within an intraday consolidation following yesterday's move up. The nearest important level of support is at around 2,645-2,650, marked by recent fluctuations. The next support level is at 2,620, marked by local high. On the other hand, level of resistance is at 2,665, marked by local high, and the next resistance level is at 2,680, marked by last week's local high. The futures contract continues to trade within a short-term consolidation, following yesterday's bounce off support level, as the 15-minute chart shows:
Nasdaq Rallied Off New Local Low
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. Big cap tech stocks were relatively stronger than the broad stock market yesterday. The index broke above the level of 6,600, following rebound off 6,300 mark. So, we still see an increased volatility. Was this some final panic selling before more meaningful upward reversal? It is hard to say, but bulls are on the run right now. The Nasdaq futures contract broke sharply above its recent downward trend line, as the 15-minute chart shows: