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More Short-Term Uncertainty as Investors Await Economic Data Releases

February 28, 2019, 7:33 AM Paul Rejczak

The U.S. stock market indexes were mixed between -0.3% and +0.1% on Wednesday, as investors hesitated following the recent advances. The S&P 500 index retraced more of its October-December downward correction of 20.2% on Monday. It got closer to the previous local highs along the 2,800 level. The Dow Jones Industrial Average lost 0.3% and the Nasdaq Composite gained 0.1% yesterday.

The nearest important resistance level of the S&P 500 index remains at around 2,800-2,820, marked by the previous medium-term local highs. On the other hand, the support level is now at around 2,765-2,780, marked by the recent local lows. The support level is also at the previous Friday's daily gap up of 2,757.90-2,760.24.

The broad stock market retraced all of its December sell-off and it got close to the medium-term resistance level of around 2,800, marked by the October-November local highs. So is it still just a correction or a new medium-term uptrend? The market broke above the 61.8% Fibonacci retracement of the 20% decline. And we may see an attempt at getting back to the record highs. But will the index break above the mentioned previous local highs? There have been no confirmed negative signals so far:

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

Short-Term Consolidation

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.2-0.4% below vs. their Wednesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Advance GDP number, Initial Claims at 8:30 a.m., Chicago PMI at 9:45 a.m. The broad stock market will likely extend its short-term consolidation It may fluctuate along the level of 2,800.

The S&P 500 futures contract trades within an intraday consolidation following yesterday's decline. The nearest important resistance level is at around 2,795-2,800, marked by the short-term local highs. On the other hand, the support level remains at 2,775-2,780. The futures contract is close to the three-day-long downward trend line, as the 15-minute chart shows:

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

Nasdaq Still at 7,100

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market gained more than 1,300 points from December the 26th local low of around 5,820. The nearest important resistance level remains at 7,100-7,150. The support level is at 7,000-7,050, marked by the recent resistance level. The Nasdaq futures contract extends it short-term consolidation, as we can see on the 15-minute chart:

Nasdaq 100 futures contract - Nasdaq 100 index chart

Apple, Amazon - Will They Continue Higher?

Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke above its January's trading range and the resistance level of $155-160 following the quarterly earnings release. It retraced some more of its November-December sell-off. But then it bounced off $175. On Monday the market came back to the local high but then we saw some profit-taking action. There have been no confirmed negative signals so far:

Daily Apple, Inc. chart - AAPL

Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The market broke above one of its three-month-long downward trend lines two months ago. Since then it has been going sideways. There is a resistance level at around $1,700-1,750. Recently it bounced off that resistance level following the quarterly earnings release. The stock got closer to the downward trend line again, but then it came back slightly lower again. Overall, it still looks like a sideways trend:

Daily Amazon.com, Inc. chart - AMZN

Dow Jones Remains Close to 26,000

The Dow Jones Industrial Average extended its short-term uptrend on Monday, as it remained above the 26,000 mark. Since then it has been going sideways. So will it continue even higher and reach the record high? Or reverse lower in the near term? There have been no confirmed negative signals so far:

Daily DJIA index chart - DJIA, Blue-Chip Index

Japanese Nikkei - Short-Term Correction

Let's take a look at the Japanese Nikkei 225 index. It accelerated the downtrend in late December, as it fell slightly below the level of 19,000. Since then it has been retracing the downtrend. Recently the market broke above its local highs and the 21,000 resistance level. The next important resistance level is at 21,600-22,000, marked by the December consolidation. Today the index retraced its recent advance, but it continued to trade along its short-term local lows:

Daily Nikkei 225 index chart

The S&P 500 index slightly extended its recent run-up on Monday. It is now close to the medium term resistance level of around 2,800. Is this a new medium-term uptrend or still just an upward correction before another medium-term leg lower? The market trades above the 61.8% Fibonacci retracement of the whole medium-term decline. There have been no confirmed negative signals so far.

Concluding, the S&P 500 index will likely open lower today. We may see some more profit-taking action and a consolidation along the 2,800 mark. There are still some short-term technical overbought conditions.

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Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care

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