The market has continued to consolidate higher this morning as it searches to test resistance at 1780-82.25. Yesterday's close was 1771.25, the market must hold this level and truly close above the pivot at 1775.75-1776.25 to keep sentiment positive.
The MAR14 E-mini S&P 500 is up 10.75 points to 1782, after recent corporate earnings reports, as well as an excellent reading on GDP, sparked investors to buy equities. 1775 is our key support level. Even with the second taper yesterday, the stocks are showing resilience, and climbing this morning.
U.S. stocks fell, with the Standard & Poor’s 500 Index headed for a one-month low, while Treasuries and the yen gained as the Federal Reserve said it would make further reductions in economic stimulus and as emerging-market currencies weakened. Gold and natural gas climbed.
With South Africa and Turkey raising rates to support their currencies, as well as a possible second taper announcement occurring today from the U.S. FOMC, stock markets could be retreating because of these interest rate moves.
Hump day is providing investors with a major speed bump before the market opens. The E-Mini contract is trading down to as low as 1772.25, almost 30-handles lower than the overnight high set just hours ago.
The S&P stabilized well by midday yesterday after putting in new lows reaching 1767. The FOMC begins its two day meeting today and many feel that the market has gone through a self-correction and that Bernanke and the Fed will remain on pace tapering.
We are among the group that has called for a market correction for some time. The global markets reacted after the Chinese reports of contraction. Other factors governing the activity are the U.S. economy, corporate earnings, the labor situation, and of course the ongoing European debt crisis.
A sharp fall to 1783 on Friday suggests that the S&P 500 is heading lower now in wave 4. Wave 4 is a corrective leg, so this can be only a temporary weakness but we still need three legs down before we turn bullish again.