The U.S. stock market indexes lost 0.8-0.9% on Wednesday, extending their short-term downtrend, as investors’ sentiment remained bearish following last week’s Thursday’s – Friday’s downward reversal. The S&P 500 index broke below 2,700 yesterday, before closing at that support level. The index was 11.5% below September the 21st record high of 2,940.91 two weeks ago. And now it trades 8.3% below the all-time high. The Dow Jones Industrial Average lost 0.8% and the Nasdaq Composite lost 0.9% on Wednesday.
The nearest important level of resistance of the S&P 500 index remains at around 2,750-2,775, marked by the recent support level. The next resistance level is at 2,795-2,800, marked by Friday’s daily gap down of 2,794.10-2,794.99, among others. The resistance level is also at 2,815-2,820, marked by mid-October local high of 2,816.94. On the other hand, the support level is at 2,700, marked by the previous short-term consolidation. The next support level is at 2,685, marked by the late October daily gap up. The support level is also at 2,600-2,630, marked by the late October lows.
The broad stock market extended its downtrend around two weeks ago, as the S&P 500 index fell closer to 2,600 mark. Then it bounced sharply and accelerated higher. On Wednesday we wrote that if the index breaks above 2,750, we could see more buying pressure. And the market got back above the broken long-term upward trend line. It was also back above 2,800 mark again. Then the index bounced off its mid-October local high and quickly reversed the uptrend. It sold off on Monday, as big cap tech stocks led the way lower. Yesterday the index fell below 2,700 and it is below the long-term upward trend line again:
Positive Expectations Again
Expectations before the opening of today’s trading session are positive because the index futures contracts trade between +0.3% and +0.6% vs. their yesterday’s closing prices. The European stock market indexes have been mixed so far. Investors will wait for series of economic data announcements today: Retail Sales, Philadelphia Fed Manufacturing Index, Empire State Manufacturing Index, Initial Claims at 8:30 a.m., Business Inventories at 10:00 a.m., Crude Oil Inventories at 11:00 a.m. The broad stock market will likely retrace some of its yesterday’s decline. We may see another attempt at bouncing off the support level. However, there have been no confirmed short-term positive signals so far.
