Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Topping Pattern or Just Consolidation?

Stock-Markets / Stock Markets 2018 Jun 11, 2018 - 06:47 PM GMT

By: Paul_Rejczak

Stock-Markets

Stocks traded within a short-term consolidation on Friday, as investors took some profits off the table following the recent advance. The broad stock market accelerated its uptrend after breaking above three-week-long consolidation a week ago. Will it continue its uptrend or is this some topping pattern ahead of downward reversal? There are still two possible medium-term scenarios.

The U.S. stock market indexes gained 0.1-0.3% on Friday, as they fluctuated following the recent advance. The S&P 500 index remained close to its mid-March local high of around 2,800. It currently trades 3.9% below January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.3%, and the technology Nasdaq Composite gained 0.1%, as it was relatively weaker than the broad stock market on Friday.


The nearest important level of resistance of the S&P 500 index is at around 2,780-2,800, marked by 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 recent local lows. The next level of support is at 2,750, marked by previous level of resistance. The support level is also at 2,735-2,740, marked by last 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 despite short-term overbought conditions? We may see some more uncertainty and profit taking action. 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):

Virtually Flat Expectations, S&P 500 at Resistance Level

The index futures contracts trade between -0.05% and +0.05% vs. their Friday's closing prices this morning. So, expectations before the opening of today's trading session are virtually flat. The main European stock market indexes have gained 0.2-0.8% so far. There will be no new important economic data announcements today. The broad stock market will likely continue to fluctuate within a short-term consolidation. The S&P 500 index remains below the resistance level of 2,800, but we may see an attempt at breaking higher. There have been no confirmed negative signals so far.

The S&P 500 futures contract trades within an intraday uptrend, as it slightly extends its last week's move up. The nearest important level of support is at around 2,770, marked by some recent fluctuations. The next support level remains at 2,750-2,760. On the other hand, level of resistance is at 2,780, and the next resistance level is at 2,800. The futures contract trades along its resistance level, as we can see on the 15-minute chart:

Nasdaq Relatively Weaker

The technology Nasdaq 100 futures contract extends its short-term consolidation following Thursday's-Friday's downward correction of its recent rally. The market reached new all-time high on Thursday, slightly above its mid-March top. Then it quickly reversed lower. The Nasdaq 100 fell more than 150 points off Thursday's daily high. So, volatility is back. The nearest important level of resistance is now at around 7160, marked by the local highs. The resistance level is also at 7,200-7,230. On the other hand support level is at 7,100-7,120, and the next level of support is at 7,050-7,080. The Nasdaq futures contract extends its short-term consolidation, as the 15-minute chart shows:

Apple, Amazon - Downward Correction

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached new record high on Thursday, as it slightly extended its short-term uptrend following last Monday's breakout above $190. Then the stock retraced some of its advance on Friday, as it fell closer to $190 again. Investors' sentiment remains bullish, but will the uptrend continue? There have been no confirmed negative signals so far. For now, it looks like a short-term consolidation:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its uptrend last week, as it reached new record high above $1,700. The stock retraced some of this rally recently. Is this a downward reversal or just a quick downward correction? For now, it looks like a downward correction. The resistance level remains at around $1,700:

Dow Jones Still Relatively Strong

The Dow Jones Industrial Average broke above its medium-term downward trend line in the first half of May. Then it continued higher above a few-week-long downward trend line. However, it kept bouncing off resistance level of 25,000. In the second half of May blue-chip stocks were relatively weaker than the broad stock market, as Dow Jones fell below 24,500 again. On Wednesday, we wrote that "the market is taking an attempt at breaking higher". And it did break up above 25,000 mark. It remains relatively stronger than the broad stock market:

The S&P 500 index fluctuated on Friday, as investors were taking short-term profits off the table following tech stocks' downward correction. Was this a topping pattern or just consolidation before another leg higher? For now, it looks like some relatively flat correction within an uptrend. There have been no confirmed negative signals so far.

Concluding, the S&P 500 index will likely open flat today, and it may extend its Friday's fluctuations. If the index breaks above the resistance level of around 2,780, we could see more buying pressure. But there is also a close resistance level of 2,800. Tech stocks will probably remain weaker than the broad stock market. For now, it looks like a correction, and not a new downtrend.

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

© 2005-2022 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