Topping Pattern Or Just Pause Before Going Higher?

The U.S. stock market indexes lost between -0.1% and -0.5% on Wednesday, as investors reacted to the Fed's interest rate hike announcement. The S&P 500 index is still close to its mid-March local high of around 2,800. It currently trades 3.4% below January's 26th record high of 2,872.87. The Dow Jones Industrial Average lost 0.5%, and the technology Nasdaq Composite lost 0.1% yesterday.

The nearest important level of resistance of the S&P 500 index remains at around 2,790-2,800, marked by the recent local highs along with mid-March local high. The next resistance level is at 2,830-2,840, marked by the late January short-term consolidation. On the other hand, support level is at 2,760-2,765, marked by the recent local lows. The next level of support is at 2,750, marked by previous level of resistance. The level of support is also at 2,735-2,740, marked by last week's Monday's daily gap-up of 2,736.93-2,740.54.

The broad stock market accelerated its short-term uptrend recently following the S&P 500 index' breakout above the resistance level of 2,750. Will it continue higher? We may see some more uncertainty and profit taking action, because the market is close to the resistance level of around 2,800. There are still two possible medium-term scenarios - bearish that will lead us below February low following trend line breakdown, and the bullish one in a form of medium-term double top pattern or breakout towards 3,000 mark. There is also a chance that the market will just go sideways for some time, and that would be positive for bulls in the long run (some kind of an extended flat correction):

(Click on image to enlarge)

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

Flat Expectations

Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade between -0.1% and 0.0% vs. their yesterday's closing prices. The European stock market indexes have lost 0.2-0.5% so far. The broad stock market will likely continue its short-term fluctuations along the above-mentioned resistance level of around 2,800. We may see another attempt at breaking higher despite yesterday's initial negative reaction to Fed's Rate Decision release. There have been no confirmed negative signals so far.

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Disclosure: None.

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