Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Gold and Silver The Die Is Cast - 27th Feb 20
US Economy Permanently Addicted to Zero Interest Rates - 27th Feb 20
Has the Stock Market Waterfall Event Started Or A Buying Opportunity? - 27th Feb 20
Advantages of Enrolling in a Retirement Plan - 27th Feb 20 - LS
South Korea Coronavirus Outbreak Data Analysis Warning Rate of Infection is Exponential! - 26th Feb 20
Gold Price Long-term Trend Analysis Forecast 2020 - 26th Feb 20
Fake Markets Are on Collision Course with Reality - 26th Feb 20
Microsoft is Crushing the S&P 500, Secret Trait Of Stocks That Soar 1,000%+ - 26th Feb 20
Europe's Best Ski Resorts For The Ultimate Adventure - 26th Feb 20
Samsung Galaxy S20+ vs Galaxy S10+ Which One to Buy? - 26th Feb 20
Gold Is Taking on $1,700 amid Rising Coronavirus Fears - 26th Feb 20
Is This What Falling Through the Floor Looks Like in Stocks? - 26th Feb 20
Gold Minsky Moment Coming - 26th Feb 20
Why Every Student Should Study Economics - 26th Feb 20
Stock Market Correction Over? - 26th Feb 20
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Friday's Stocks Sell-Off Sets The Tone For Weeks To Come

Stock-Markets / Stock Markets 2018 Feb 05, 2018 - 02:06 PM GMT

By: Paul_Rejczak

Stock-Markets

The main U.S. stock market indexes lost 2.0-2.5% on Friday, breaking below their three-day-long consolidation as investors reacted to quarterly corporate earnings, economic data releases, among others. The S&P 500 index accelerated its short-term downtrend following breakout below the level of 2,800. It currently trades 3.9% below its January 26 record high of 2,872.87. The broad stock market retraced more than 50% of its month-long rally off the December 29th local low at 2,673.61. The Dow Jones Industrial Average was relatively weaker, as it lost 2.5% on Friday, and the technology Nasdaq Composite fell 2.0%.


The nearest important level of support of the S&P 500 index is at around 2,750, marked by the January 11 daily gap up of 2,750.80-2,752.78. There is also an important Fibonacci retracement of 61.8% of the month-long rally at the level of 2,749.73. The next potential support level is at 2,720-2,740, marked by some previous consolidation. On the other hand, resistance level is now at 2,780-2,800, marked by previous level of support. The resistance level is also at around 2,835, marked by last week's local highs.

There is a pretty big chance that the index reached some major medium-term high on Friday a week ago. It broke below its month-long upward trend line on Tuesday following gap-down opening of the trading session, confirming reversal of the uptrend. Will it retrace all of its January rally or even continue lower? The index is at its three-month-long upward trend line. For now, it looks like a downward correction:

Negative Expectations Again

The index futures contracts trade 0.8-1.2% lower vs. their Friday's closing prices this morning. So, investors' expectations before the opening of today's trading session are very negative again. The European stock market indexes have lost 1.0-1.4% so far. Investors will wait for the ISM Non-Manufacturing PMI number release at 10:00 a.m. The market expects that it was at 56.5 in January. However, this data release probably won't affect the overall negative market sentiment today. Investors will also wait for more quarterly corporate earnings announcements.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following an overnight move down. The market remains close to its local lows, well below its Friday's panic end-of day-lows. It continues its short-term downtrend, as it retraces more of January move up. The nearest important level of resistance is at around 2,760, marked by an overnight gap down and Friday's daily low. The next level of resistance is at 2,780-2,800, among others. On the other hand, support level is at 2,730-2,740, marked by short-term local lows. The next level of support is at 2,700-2.720. The futures contract is well below its Friday's session lows, as the 15-minute chart shows:

Nasdaq At New Lows

The technology Nasdaq 100 futures contract follows a similar path, as it continues its short-term downtrend today. It extends its Friday's sell-off after an overnight gap-down opening. The nearest important level of resistance remains at around 6,750-6,760, and the next resistance level is at 6,800, among others. On the other hand, potential support level is at 6,680-6,700. The Nasdaq futures contract trades below its short-term downward trend line, as we can see on the 15-minute chart:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) - worth mentioning because Apple's market capitalization is around $850 billion, which is more than two times current value of all the cryptocurrencies combined. The stock reached new record high around three weeks ago, following short-term consolidation along the support level of $175. The market got closer to $180 mark, but it failed to continue higher. Consequently, the stock retraced its January advance and continued lower. It accelerated its decline on Friday, as it got closer to $160. We can see some short-term oversold conditions, but no confirmed positive signals so far:

On the other hand, Amazon.com, Inc. stock (AMZN) was relatively strong vs. the broad stock market. Despite an overall weakness, it further extended its month-long rally recently. The stock even reached new record high on Friday, before closing slightly lower. It remained above the level of $1,400 following bouncing off $1,500 mark. The market may be trading within some medium-term topping pattern here:

The Dow Jones Industrial Average daily chart shows that blue-chip index broke below its short-term consolidation on Friday. The price broke below the level of 26,000 and continued lower. We still can see medium-term negative technical divergences - the most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI 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.

The DJIA broke below its three-month-long upward trend line. Is this a new downtrend or still just correction? For now, it looks like a downward correction, because it retraces relatively small amount of its months-long rally:

Concluding, the S&P 500 index sold off on Friday, as it lost more than 2% following breakout below its three-day-long consolidation and the support level of 2,800. The broad stock market continued its short-term downtrend after some important economic data, quarterly earnings releases. Investors took profits off the table following the unprecedented month-long rally. Is this a new downtrend or just downward correction? For now, it looks like a quick correction, but a little more downside and we may see some panic in the stock market. Friday's sell-off sets the tone for weeks to come - new record highs seem like some very unlikely scenario now.

The S&P 500 index traded around 7.5% above its December 29 yearly closing price on Friday January 26. This almost month-long rally seems unprecedented. The legendary investor John Templeton once said that "bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria”. So, was this an euphoria phase of the nine-year-long bull market? It's hard to say, but some major downside risks are growing.

We still can see some medium-term overbought conditions. We can use indicators such as Relative Strength Index (RSI), Stochastic Oscillator, Money Flow Index to identify overbought conditions. For example, one can view a given market as "overbought" if the RSI indicator for this market is above 70. Paying attention to the overbought/oversold status of the market is very useful, but there are many other factors that need to be considered before placing a trade.

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

6 Critical Money Making Rules