Sell-Off And Then Bounce, Topping Pattern Or Just Correction?

The U.S. stock market indexes gained 0.3-0.6% on Wednesday, retracing some of their Tuesday’s move down, as investors’ sentiment slightly improved despite rising bond yield. The bounced off 2,700 mark and it extended its short-term consolidation. It currently trades 5.3% below January 26 record high of 2,872.87. The gained 0.3% and the technology gained 0.6% yesterday.

The nearest important level of resistance of the S&P 500 index is at around 2,720-2,725, marked by Tuesday’s daily gap down of 2,718.59-2,725.47, among others. The next resistance level remains at 2,740-2,750, marked by mid-March local high. On the other hand, support level is at around 2,700-2,710, marked by last Thursday’s daily gap up of 2,701.27-2,704.54 and yesterday’s daily low. The support level is also at 2,680-2,685, marked by previous resistance level.

The broad stock market extended its short-term uptrend recently, as the S&P 500 index broke above the level of 2,700 again. Stocks lost some ground on Tuesday, but it didn’t look like a new downtrend. So, will the run-up continue towards 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):

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


Mixed Expectations – Correction or New Downtrend?

The index futures contracts trade between -0.1% and -0.4% vs. their Wednesday’s closing prices right now. So, expectations before the opening of today’s trading session are slightly negative. The European stock market indexes have gained 0.2-0.3% so far.

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