Stocks Fell Ahead of Today’s Fed – A New Downtrend?

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Stocks Fell Ahead of Today’s Fed – A New Downtrend?

Stocks went lower yesterday, as investors took profits off the table ahead of today’s FOMC release. Was it a reversal or just correction?

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The S&P 500 index lost 0.75% on Tuesday, as it broke below its recent trading range. The broad stock market’s gauge retraced some of its rally and it got back below the 4,650 level. On the previous Friday the index fell to the local low of 4,495.12 and it was 5.24% below the Nov. 22 record high of 4,743.83. Then we saw another attempt at getting back to the all-time high and on Friday the index closed the highest in history.

So was yesterday’s decline only a correction? For now, it looks like a downward correction, but we may see some more volatility following today’s FOMC release and tomorrow’s ECB and the BOE release. Today the index is expected to open virtually flat and it will likely trade within a consolidation before the Fed release at 2:00 p.m.

The nearest important resistance level is now at 4,665-4,670, marked by the recent local lows and the next resistance level is at 4,700. On the other hand, the support level is at 4,610-4,630, marked by the previous Tuesday’s daily gap up of 4,612.60-4,631.97. The support level is also at 4,600. The S&P 500 is close to the early November local low, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Stocks

Tech Stocks Are Relatively Weaker

Let’s take a look at the Nasdaq 100 chart. The technology index bounced to the resistance level of 16,400. Tech stocks remain relatively weaker, as the Nasdaq 100 is closer to the early December local lows.

Stocks

Conclusion

The S&P 500 index will likely trade within an intraday consolidation before the Fed release today. Then we may see an increased volatility in stocks, currencies and commodities. The S&P 500 index trades within a downward correction and we may see more profit-taking action in the near term.

Here’s the breakdown:

  • The S&P 500 is expected to open virtually flat ahead of today’s FOMC release.
  • We are maintaining our short position from the 4,678 level.

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Thank you.

Paul Rejczak,

Stock Trading Strategist

Sunshine Profits: Effective Investments through Diligence and Care


The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits' associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data's accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his 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, affiliates as well as their family members 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.

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Hi, I’m Przemysław Radomski, but please feel free to call me PR. In the next few paragraphs I’ll do my best to describe my personal story and let you know what I can do for you. My adventure with investments began when I was 17 and I received an inheritance, which I then saw as sizable. I knew I couldn’t waste it away, so I focused my educational efforts on gaining financial knowledge, even though I had previously been more inclined towards engineering. My choice in university, a major and minor –in investment banking –, served the goal I had set for myself.
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