Fed Hikes, Stocks Fall, Just Correction?

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The U.S. stock market indexes lost 0.2-0.4% on Wednesday, as investors reacted to the FOMC's Interest Rate hike announcement. The S&P 500 index has reached the new record high of 2,940.91 on Friday. It currently trades 1.1% below that high. The Dow Jones Industrial Average lost 0.4% and the technology Nasdaq Composite lost 0.2% yesterday.

The nearest important level of support of the S&P 500 index is now at 2,900. The market fell below its last Thursday's daily gap up of 2,912.36-2,919.73 yesterday. The support level is also at 2,885-2,890, marked by the recent local lows. On the other hand, the nearest important level of resistance remains at around 2,920-2,930, marked by Monday's daily gap down of 2,923.79-2,927.11. The resistance level is also at 2,940, marked by the record high.

The broad stock market reached the new record high last week, as the S&P 500 index extended its short-term uptrend above the level of 2,900. Will it continue higher despite some short-term technical overbought conditions? The index is at its three-month-long upward trend line following yesterday's intraday reversal, as we can see on the daily chart:

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

New Downtrend or Just Correction?

The index futures contracts are trading between +0.1% and +0.3% vs. their Wednesday's closing prices. So expectations before the opening of today's trading session are slightly positive. The main European stock market indexes have been mixed so far. Investors will wait for the series of economic data announcements this morning: Durable Goods Orders, Final GDP q/q number, Wholesale Inventories, Initial Claims at 8:30 a.m., Pending Home Sales at 10:00 a.m. The broad stock market will likely remain within a short-term consolidation along the level of 2,900. The index is close to its late August local high. However, if the S&P 500 breaks lower, we could see more selling pressure. For now, it looks like just another correction within an uptrend.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following its yesterday's decline. The nearest important level of resistance is now at around 2,915-2,920, marked by the recent support level. The next resistance level is at 2,930-2,935. The resistance level is also at 2,940-2,945, marked by the record high. On the other hand, the support level is at 2,900-2,905, among others. The futures contract is below its recent trading range, as the 15-minute chart shows:

S&P 500 futures contract - S&P 500 index chart

Nasdaq Relatively Stronger

The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates following its yesterday's decline. However, the tech stocks' gauge is now relatively stronger than the broad stock market. It continues to trade above the recent local lows. The nearest important level of resistance is at around 7,650-7,700, marked by the topping pattern along the record high. On the other hand, the support level is now at 7,550-7,600, among others. The Nasdaq futures contract continues to trade along the level of 7,600, as we can see on the 15-minute chart:

Nasdaq 100 futures contract - Nasdaq 100 index chart

Apple, Amazon - Going Sideways Again?

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached the new record high at the level of $229.67 on September the 5th, before reversing lower. Then it broke below its month-long upward trend line. The resistance level remains at $225-230. On the other hand, the support level is at $215:

Daily Apple, Inc. chart - AAPL

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It has reached the new record high at the price of $2,050.50 in the early September. Since then it was retracing its record-breaking rally. The stock broke below the month-long upward trend line and now it is bouncing off its medium-term upward trend line:

Daily Amazon.com, Inc. chart - AMZN

Dow Jones Also Lower

The Dow Jones Industrial Average reached the new all-time high at the level of 26,769.16 last week. Since then it is retracing its recent advance. It broke below the support of around 26,500 yesterday, but it continued to trade above its upward trend line:

Daily DJIA index chart - DJIA, Blue-Chip Index

The S&P 500 index reached the new record high last week following the recent breakout above its late August local high. Then it retraced some of this record-breaking advance. Yesterday, the index reversed its intraday rally following the Interest Rate hike announcement. Will it continue lower today? We will likely see some more short-term consolidation along the level of 2,900.

Concluding, the S&P 500 index will probably open slightly higher today. Then we may see a consolidation close to 2,900 mark. It still looks like a correction within an uptrend. There have been no confirmed medium-term negative signals so far.

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Thank you.

Paul Rejczak
Stock Trading Strategist
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DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 220.65 1.34 0.61 28,792,082 Trade
AMZN Amazon.com Inc. 1,789.30 25.27 1.43 4,500,015 Trade

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