Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks Set to Open Lower, Should You Buy?

Stock-Markets / Stock Markets 2018 Mar 19, 2018 - 01:08 PM GMT

By: Paul_Rejczak

Stock-Markets

Stocks extended their short-term consolidation on Friday, as investors continued to hesitate following Tuesday-Wednesday move down. The broad stock market failed to continue its rebound from February 9 low last week despite technology stocks reaching new record highs. There are still two possible future scenarios. Or maybe three, but the third one is the worst.

The U.S. stock market indexes were mixed between 0.0% and +0.3% on Friday, extending their short-term consolidation, as investors were undecided after recent move down. The S&P 500 index gained 0.2% and it remained at the support level of previous Friday's daily gap up. It currently trades 4.5% below January 26 record high of 2,872.87. The Dow Jones Industrial Average was relatively stronger than the broad stock market, as it gained 0.3%, and the technology Nasdaq Composite was unchanged.


The nearest important level of resistance of the S&P 500 index remains at around 2,775-2,780, marked by Wednesday's daily high. The next resistance level is at 2,790-2,800, marked by short-term local highs. On the other hand, support level is at 2,740-2,750, marked by previous Friday's daily gap up of 2,740.45-2,751.54. The next level of support is at 2,700-2,720, among others.

We can see that stocks reversed their medium-term upward course following whole retracement of January euphoria rally. Then the market bounced off its almost year-long medium-term upward trend line, and it retraced more than 61.8% of the sell-off within a few days of trading. Is this just an upward correction or uptrend leading to new all-time highs? The market is still in the middle of two possible future scenarios. The bearish case leads us to February low or lower after breaking below medium-term upward trend line, and the bullish one means potential double top pattern or breakout above the late January high. However, the worst future scenario for traders would be stocks going sideways:

Negative Expectations

The index futures contracts are trading 0.5-1.3% lower vs. their Friday's closing prices, so expectations before the opening of today's trading session are very negative. The main European stock market indexes have lost 0.7-1.3% so far. There will be no new important economic data announcements today. The S&P 500 index remains at its previous Friday's daily gap up, which continues to act as a short-term support level. If the market breaks lower, it could continue towards the level of 2,700.

The S&P 500 futures contract trades within an intraday downtrend, following an overnight breakdown below Friday's trading range. The nearest important level of resistance is at around 2,745-2,750, marked by previous support level. On the other hand, support level is at 2,730-2,735, marked by short-term local low. The futures contract is below its recent short-term consolidation, as we can see on the 15-minute chart:

Nasdaq Much Weaker

The technology Nasdaq 100 futures contract was weaker than the broad stock market on Friday, and it continues to be relatively weak this morning. It trades within an intraday downtrend after breaking below the level of 7,000. The market gained more than 1,000 points off its February 9 bottom, as it remarkably retraced all of its late January - early February sell-off in one month. So, it looks like a downward correction following this rally. However, a breakdown below 7,000 mark means that bulls are losing the battle here. The nearest important level of resistance is now at around 6,980-7,000, and support level is at 6,900, among others. The Nasdaq futures contract trades below its intraday downward trend line, as the 15-minute chart shows:

Two Biggest Market Caps Likely to Go Lower

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) again. The market reached new record high on Tuesday, but then it reversed its intraday uptrend and closed below $180. We saw some negative medium-term technical divergences - the most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI or MACD based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low. On Tuesday, the market formed a negative candlestick chart pattern called "bearish engulfing". It consists of a smaller white candlestick followed by a black candlestick that "engulfs" the white one. This downward reversal pattern has been confirmed by Wednesday's move down. The price could reach its short-term upward trend line today, but will it bounce or break below that support level? It will probably break lower:

Amazon.com, Inc. stock (AMZN) continued its uptrend recently, as it reached new record high above the price of $1,600. The stock reversed its upward course on Tuesday and closed below previous day's closing price. Tuesday's trading action was bearish, as the stock formed a similar to the above-mentioned bearish engulfing pattern. The nearest important level of resistance remains at around $1,600, and we still can see negative technical divergences:

Dow Jones Remains Below 25,000 Mark

The Dow Jones Industrial Average daily chart shows that blue-chip index was relatively weaker than the broad stock market and much weaker than record-breaking technology stocks recently, as it continued to trade well below late February local high. The market broke below 25,000 mark on Wednesday, as it retraced more of its recent rebound. Possible support level is at around 24,250, marked by previous local low. If the index breaks lower, it could continue towards February 9 panic low. In late February, there was a negative candlestick pattern called Dark Cloud Cover, a pattern in which the uptrend continues with a long white body, and the next day it reverses following higher open and closes below the mid-point between open and close prices of the previous day. It acted as a resistance level, as we can see on the daily chart:

Concluding, the S&P 500 index is expected to open lower today, but it will probably continue to fluctuate along the support level of its previous daily gap up. We prefer to be out of the market again, avoiding low risk/reward ratio trades. So, we wouldn't buy yet. However, if the index continues lower, we would think about buying the dip at around the support level of 2,700.

Last week's rally failed to continue following negative political news releases. Was this just quick profit-taking action or more meaningful downward reversal? It's hard to say right now, but pre-session sentiment is negative today, as the index futures contracts trade much lower vs. their Friday's closing prices. It seems that the overall market risk is higher than in the late February when S&P 500 was trading at the same level.

If you enjoyed the above analysis and would like to receive free follow-ups, we encourage you to sign up for our daily newsletter – it’s free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to our premium daily Gold & Silver Trading Alerts. Sign up now.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts
SunshineProfits.com

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 behavior based on both traditional and innovative methods of technical analysis. Paul has made his name by developing mechanical trading systems. Paul is the author of Sunshine Profits’ premium service for stock traders: Stock Trading Alerts.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Paul Rejczak Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in