S&P 500 – Is A 5% Correction Enough?

The S&P 500 bounced from the 4,500 level on Thursday, as it retraced most of its Wednesday’s sell-off. Was it a reversal or just another upward correction?

For in-depth technical analysis of various stocks and a recap of today's Stock Trading Alert we encourage you to watch today's video.

The broad stock market index gained 1.42% on Thursday after opening slightly lower and bouncing from the new local low of 4,504.73. The index fell the lowest since the October 19 and it went below its early September local high of around 4,546. Overall, it lost 5.04% from the Nov. 22 record high of 4,743.83. But Thursday’s trading session was bullish and stocks were gaining. Was it an upward reversal? This morning stocks are expected to open 0.3% higher after the mixed monthly jobs data release. For now, it looks like a correction within a downtrend. We may see a short-term consolidation following the recent declines.

The nearest important support level is now at 4,500. On the other hand, the resistance level is at 4,580-4,600, marked by the recent local lows. The S&P 500 remains below its short-term downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Nasdaq 100 Remains Close to the 16,000 Level

Let’s take a look at the Nasdaq 100 chart. The technology index remains relatively stronger than the broad stock market, as it is still trading above the early September local highs of around 15,700. However, the technology index gained just 0.7% yesterday, as we can see on the daily chart:

Apple Remains Volatile After Reaching New Record High

Let’s take a look at biggest stock in the S&P 500 index: AAPL. Apple accelerated its uptrend once again and on Wednesday it reached the new record high of $170.30. Apple’s market cap reached almost 2.8 trillion dollars! But on Thursday, the stock was 7.3% below its Wednesday’s high, before bouncing back above the $160 level. So the stock priceremains very volatile and we may see a medium-term topping pattern.

Conclusion

The S&P 500 index is expected to open 0.3% higher this morning after the mixed monthly jobs data release. We may see a consolidation and some more volatility following the recent declines. There have been no confirmed positive signals so far.

Here’s the breakdown:

• The S&P 500 slightly extended its short-term downtrend yesterday before bouncing from the 4,500 level.
• A speculative short position is still justified from the risk/reward perspective.
• We are expecting an over 5% correction.

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Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care

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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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