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Paul Rejczak

Paul Rejczak

Writer, Sunshine Profits

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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Nasdaq Continues To Fall On Disappointing Tech Earnings

Nasdaq

Stocks were going down on Friday, as investors reacted to the monthly jobs data release. Was it just some profit-taking action following the recent advance or a downward reversal? Will the S&P 500 index fall back below 2,700 mark?

The U.S. stock market indexes lost between 0.4 percent and 1.0 percent on Friday, extending their short-term fluctuations, as investors reacted to the monthly jobs data release along with some quarterly corporate earnings releases. The S&P 500 index remained above the level of 2,700, following Wednesday's breakout. It was 11.5 percent below September the 21st record high of 2,940.91 on Monday a week ago. And now it trades 7.4 percent below the all-time high. The Dow Jones Industrial Average lost 0.4 percent and the Nasdaq Composite lost 1.0 percent on Friday.

The nearest important level of resistance of the S&P 500 index is at around 2,750-2,760, marked by the previous level of support and Friday's daily high. The next resistance level is at 2,780-2,800, marked by mid-October consolidation. On the other hand, the level of support is now at around 2,685-2,705, marked by last Wednesday's daily gap up of 2,685.43-2,705.60. The next support level remains at 2,630-2,650.

The broad stock market extended its downtrend a week ago, as the S&P 500 index fell closer to 2,600 mark. Then it bounced sharply and accelerated higher on Wednesday. For now, it looks like an upward correction within a downtrend. However, if the index breaks above 2,750, we could see more buying pressure. The market is at the broken long-term upward trend line, as we can see on the daily chart:

(Click to enlarge)

Slightly Positive Expectations

Expectations before the opening of today's trading session are slightly positive, because the index futures contracts trade between +0.2 percent and +0.3 percent vs. their Friday's closing prices. The European stock market indexes have gained 0.2-0.5 percent so far. Investors will wait for the ISM Non-Manufacturing PMI number release at 10:00 a.m. The broad stock market may extend its short-term fluctuations today. The S&P 500 got closer to the important resistance levels and we may see some more profit-taking action. Related: Are Gold Stocks Preparing For A Winter Rally?

The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of the Friday's decline. The nearest important level of resistance is now at around 2, 735-2,745, marked by the recent fluctuations. The next resistance level is at 2,755-2,765, among others. On the other hand, the support level is at 2,700. The futures contract trades below its last week's upward trend line, as the 15-minute chart shows:

(Click to enlarge)

Nasdaq Close to 7,000 Again

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of the Friday's decline. The market sold off after Thursday's quarterly earnings release from Apple. The nearest important level of resistance is now at around 7,000-7,050. The next resistance level remains at 7,150-7,200, marked by the previous local highs. On the other hand, the support level is at 6,900-6,950, among others. The Nasdaq futures contract continues to trade along the level of 7,000, as we can see on the 15-minute chart:

(Click to enlarge)

Apple, Amazon - Mixed Picture

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It got closer to the support level of around $205-210 again on Friday, following Thursday's quarterly earnings release. The stock fell the lowest since the early August. Is this still just a downward correction or some new downtrend? For now, it looks like a correction. But if the price breaks below its short-term local lows of around $205, it could accelerate towards $200 or lower:

(Click to enlarge)

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its sell-off following last Thursday's quarterly earnings release. The stock continued lower last week, but then it bounced off support level of $1,500. Will it continue higher? Or was it just a quick upward correction before another leg down?

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The market may fluctuate along the resistance level of around $1,700 for some time:

(Click to enlarge)

Dow Jones Remains Above 25,000 Mark

The Dow Jones Industrial Average retraced some of its recent decline last week. It got back above the level of 25,000. The nearest important level of resistance is now at around 25,500-25,750, marked by the previous local highs. The resistance level is also at 26,000:

(Click to enlarge)

German DAX Also Higher

Let's take a look at the German DAX index now. It was relatively weaker than the U.S. broad stock market recently, as it remained below its late March local low of 11,727. The index accelerated the downtrend following gapping down in the late October. Was it a so-called "exhaustion gap" before reversing higher? The market trades above that gap, so we can see an attempt at reversing the downtrend. However, it continues to trade below an almost half-year-long downward trend line:

(Click to enlarge)

The S&P 500 index continues to trade above the level of 2,700, following Wednesday's breakout higher. Stocks may have reached their short-term panic bottom a week ago on Monday. But will the bounce continue? The market is at the relatively important level of resistance of 2,750-2,760.

Concluding, the S&P 500 index will probably open slightly higher today, following last week's advance and a rebound off the support level. However, we may see some more volatile fluctuations along the long-term upward trend line.

By Paul Rejczak via Sunshine Profits

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