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paul-rejczak

Closer to Breakout?

September 13, 2018, 7:30 AM Paul Rejczak

The U.S. stock market indexes were mixed between -0.2% and +0.1% vs. their Tuesday's closing prices yesterday, as investors continued to hesitate following the recent fluctuations. The S&P 500 index has reached the record high of 2,916.50 on August the 29th. It currently trades 0.9% below that high. The Dow Jones Industrial Average gained 0.1% and the technology Nasdaq Composite lost 0.2% on Wednesday.

The nearest important level of support of the S&P 500 index remains at around 2,860-2,865, marked by the recent fluctuations. The support level is also at 2,830-2,835. On the other hand, the nearest important level of resistance is at 2,885-2,890, marked by the previous support level and the recent local highs, among others. The next resistance level is at 2,900. The resistance level is also at 2,910-2,915, marked by the mentioned late August record high.

The broad stock market reached the new record high in the late August, as it extended its short-term uptrend above the level of 2,900. Since then it trades within a correction. The market retraced its late August advance, and it got back down to the support level of its late January high. Will it continue lower or reverse higher towards the all-time high? For now, it looks like a correction within an uptrend. The index continues to trade above its medium-term upward trend line, as we can see on the daily chart:

Daily S&P 500 index chart - SPX, Large Cap Index

More Sideways Price Action

The expectations before the opening of today's trading session are slightly positive, because the index futures contracts trade 0.2-0.3% higher vs. their Wednesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements today: Consumer Price Index, Initial Claims at 8:30 a.m. The broad stock market will probably extend its short-term fluctuations. There is no clear short-term direction. So which direction is next? For now, it looks like a relatively flat correction within a few-months-long uptrend. There have been no confirmed negative medium-term signals so far.

The S&P 500 futures contract trades within an intraday uptrend, as it extends its recent consolidation. The market remains the highest since last Thursday. But will it continue above the resistance level of around 2,900? The nearest important level of support remains at 2,880-2,885. The support level is also at 2,865-2,870, marked by the short-term local lows. The futures contract is at its local highs, as the 15-minute chart shows:

S&P 500 futures contract - S&P 500 index chart

Nasdaq Still at 7,500

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. Tech stocks retrace some of their yesterday's intraday decline, but they remain relatively weaker than the broad stock market following almost 4% downward correction off the August 30th record high of around 7,700. The level of resistance is at 7,550, marked by the recent local high. On the other hand, the support level is now at 7,450-7,500, marked by the previous level of resistance. The support level is also at 7,400-7,420. The Nasdaq futures contract continues to trade along the level of 7,500, as we can see on the 15-minute chart:

Nasdaq 100 futures contract - Nasdaq 100 index chart

Big Cap Tech Stocks Closer to Highs Again

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached the new record high at the level of $229.67 last week, before reversing lower. Then it broke below its month-long upward trend line. The nearest important level of support is at $215-220, marked by the recent consolidation. The stock bounced off that support level on Tuesday. For now, it looks like an upward correction within a short-term downtrend:

Daily Apple, Inc. chart - AAPL

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It has reached the new record high at the price of $2,050.50 recently. Since then it was retracing some of this record-breaking rally. The stock broke below the month-long upward trend line. We still can see negative technical divergences. Will Tuesday's intraday reversal lead the market to the record high again? The resistance level remains at $2,000:

Daily Amazon.com, Inc. chart - AMZN

Dow Jones at 26,000 Mark

The Dow Jones Industrial Average continues to fluctuate following its August advance. The blue-chip stocks' gauge trades along the level of 26,000. But it is still way below the late January record high of 26,616.71. The nearest important level of resistance is at 26,340-26,440, marked by the late January daily gap down. The index remains above its two-month long upward trend line, as the daily chart shows:

Daily DJIA index chart - DJIA, Blue-Chip Index

The S&P 500 index reached the new record high at the level of 2,916.50 in the late August. Since then the broad stock market retraced some of its rally and it got back below 2,900 mark. Was it a meaningful downward reversal or just a correction before another leg up? There have been no confirmed negative signals so far. However, we still can see some short-term technical overbought conditions along with negative technical divergences.

Concluding, the S&P 500 index will likely open slightly higher today. Then it may fluctuate along the short-term resistance level of 2,900. If it breaks higher, we could see more buying pressure. There have been no confirmed negative medium-term signals so far.

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Thank you.

Paul Rejczak
Stock Trading Strategist
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