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Paul Rejczak

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Stock market strategist, who has been known for quality of his technical and fundamental analysis since the late nineties. He is interested in forecasting market…

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Can The S&P 500 Shake Off Negative Sentiment?

NYC

Stocks continued lower yesterday as investor sentiment worsened following the Turkey crisis, trade war fears, and a rally in the U.S. dollar. The big questions now revolve around whether the S&P 500 index will break below the 2,800 mark, or bottom out and head higher.

The U.S. stock market indexes lost between 0.6 percent and 1.2 percent on Wednesday, extending their short-term downtrend, as investor sentiment worsened. The S&P 500 index got very close to the level of 2,800 before bouncing off that support level. It currently trades 1.9 percent below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average lost 0.6 percent and the Nasdaq Composite lost 1.2 percent on Wednesday.

The nearest important level of support for the S&P 500 index is now at around 2,800-2,805, marked by the recent local lows. The next major level of support is at 2,780-2,790. On the other hand, the level of resistance is now at around 2,825, marked by the recent support level. The resistance level is also at 2,845-2,850, marked by last Friday's daily gap down of 2,842.20-2,851.98.

The broad stock market got close to its January record high recently, as investor sentiment improved following quarterly corporate earnings, economic data releases. The S&P 500 index traded within a relatively narrow trading range in the middle of last week. Then it broke lower on Friday. Was it some medium-term downward reversal or just downward correction before another leg up? There are still two possible medium-term scenarios - a bearish scenario that will lead us towards the February low again, and the bullish one - a breakout higher towards the 3,000 mark. The S&P 500 headed headed up recently before it bounced off the resistance level marked by the January's record high last week:

(Click to enlarge)

New Uptrend or Just Upward Correction?

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.5-0.8 percent higher vs. yesterday's closing prices. The European stock market indexes have gained 0.5-0.6 percent so far. Investors will wait for some economic data announcements today: Housing Starts, Building Permits, Philadelphia Fed Manufacturing Index, Initial Claims at 8:30 a.m. The broad stock market will probably open higher and retrace some of its yesterday's decline. For now, it looks like an upward correction or a consolidation. There may be some more short-term uncertainty following the recent rout. Related: Tesla’s Board Delivers A Stern Message To Elon Musk

The S&P 500 futures contract trades within an intraday uptrend, as it retraces most of Wednesday's intraday decline. The nearest important level of resistance is now at around 2,840-2,845, marked by the recent local highs. The resistance level is also at 2,850-2,855. On the other hand, the support level remains at 2,800-2,815. The futures contract trades closer to its recent local highs, as we can see on the 15-minute chart:

(Click to enlarge)

Nasdaq Also Higher

The Nasdaq 100 futures contract follows a similar path, as it retraces its recent sell-off, The market is back above the 7,400 mark again. It is still relatively close to the record high of around 7,530. The nearest important level of resistance is at 7,450-7,470, marked by the local highs. On the other hand, the level of support is now at 7,300-7,350, among others. The Nasdaq futures contract trades within its short-term consolidation again, as the 15-minute chart shows:

(Click to enlarge)

Apple, Amazon Still Close to Their New Record Highs

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). Despite an overall broad stock market weakness it continues to trade along its Monday new record high of $210.95. There have been no confirmed negative signals so far. However, we may see a downward correction at some point. The nearest important level of support is now at $190-200, marked by the previous resistance level:

(Click to enlarge)

Now let's take a look at the Amazon.com, Inc. stock (AMZN) daily chart. It reached a new record high on Monday at the level of $1,925.00. The nearest important level of resistance remains at around $1,925. On the other hand, the support level is 1,850. The stock continues to trade above its medium-term upward trend line, as we can see on the daily chart:

(Click to enlarge)

Dow Jones Bounces Off 25,000

The Dow Jones Industrial Average retraced more of its recent advance on Wednesday, as it reached the support level of 25,000. The blue-chip stocks gauge bounced off that level, but there have been no confirmed positive signals so far. Is this just downward correction or a new downtrend? For now, it looks like a correction. However, if the DJIA breaks below 25,000 mark, we could see more selling pressure:

(Click to enlarge)

The S&P 500 index bounced off the support level of around 2,800 yesterday. Was it an upward reversal or just a correction before another leg lower? We may see some more short-term uncertainty, as investors react to global news releases. However, we can still see a pretty mild stock market reaction to the Turkey crisis and trade war fears.

Concluding, the broad stock market will likely open higher today. Then we may see some more short-term uncertainty following last week's Friday decline. The S&P 500 index bounced off 2,800 mark yesterday. It could be a new uptrend, but there are some resistance levels ahead.

By Paul Rejczak via Sunshine Profits

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