Stock market shrugs off trade war fears, but will it go higher?
Wednesday's trading session was overall bullish, as the main stock market indexes closed between -0.3% and +0.3% vs. their Tuesday's closing prices following much lower opening in reaction to Gary Cohn's resignation's news. The S&P 500 index closed virtually flat after bouncing off support level at 2,700. It currently trades around 5% below January 26 record high of 2,872.87. The Dow Jones Industrial Average lost 0.3%, and the technology Nasdaq Composite gained 0.3% on Wednesday.
The technical outlook of the S&P 500 index remains unchanged. The nearest important level of resistance is at around 2,730, marked by recent local highs. The resistance level is also at 2,740-2,750, marked by Fibonacci's 61.8% retracement of the late January - early February move down at 2,742.92. On the other hand, support level is at 2,690-2,700. The support level is also at 2,650-2,660, marked by last week's local low.
The S&P 500 index reached its record high on January 26. It broke below month-long upward trend line, as it confirmed uptrend's reversal. Then the broad stock market gauge retraced all of its January rally and continued lower. The index extended its downtrend on February 9, as it was almost 12% below the late January record high. 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 seems to be 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 most likely scenario may be that stocks go sideways for a while:
Mixed Expectations So Far
Expectations before the opening of today's trading session are mixed or virtually flat, because the index futures contracts trade between -0.2% and +0.3% vs. their yesterday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for tomorrow's monthly jobs data release, but we will see some economic data announcements today: Challenger Job Cuts number at 7:30 a.m., Initial Claims at 8:30 a.m. There will also be the ECB Press Conference at 8:30 a.m. Will the market break above its short-term consolidation today? Probably not by much. We may see some more uncertainty following Friday-Monday's advance.
The S&P 500 futures contract is within an intraday consolidation after yesterday's intraday move up. The market remains close to resistance level of 2,730, marked by recent local highs. If it breaks higher, it could continue to the next level of resistance at 2,750-2,760, marked by late February short-term consolidation. On the other hand, support level remains at 2,680-2,700, marked by yesterday's overnight consolidation. The futures contract remains above its week-long upward trend line, as we can see on the 15-minute chart: