Grim GDP data may trigger reversal in stocks
|The S&P 500 index slightly extended its downtrend yesterday, but at the end of the day it was higher. So was it a reversal or just another short-term bounce?
The broad stock market index gained 0.21% on Wednesday, after bouncing from the new local low of 4,162.90. The S&P 500 fell to its March local lows of around 4,160. It extended the downtrend despite quarterly corporate earnings releases. There’s still a lot of uncertainty concerning the Fed’s monetary policy tightening fears and Ukraine conflict. This morning the S&P 500 index is expected to open 1.1% higher following yesterday’s FB quarterly earnings release. However, the market retraced some of its overnight advance after much worse than expected quarterly Advance GDP data release (-1.4% vs. expectations of +1.1%).
The nearest important resistance level is now at around 4,200-4,250. On the other hand, the support level is at 4,100- 4,150, marked by the previous lows. The S&P 500 index retraced the whole March advance, as we can see on the daily chart.
Futures contract above 4,200 again
Let’s take a look at the hourly chart of the S&P 500 futures contract. On Tuesday the market fell to its previous local lows of around 4,140, and yesterday it bounced back above the 4,200 level again.
The market is technically oversold and there are some positive trend exhaustion signals. Therefore, we are expecting an upward correction from the current levels (our premium Stock Trading Alert includes details of our trading positions along with the stop-loss and profit target levels).
Conclusion
On Wednesday, the S&P 500 index fluctuated following its recent declines. The market closed higher, but it was still below the 4,200 level. Today, the important Advance GDP release was much worse than expected. However, we may see a “sell the rumor, buy the news” action here. Investors will also wait for today’s important quarterly earnings releases from AAPL and AMZN.
Here’s the breakdown:
-
The S&P 500 index remained below the 4,200 level yesterday; it may be counterintuitive, but today’s worse than expected Advance GDP release may trigger an upward reversal.
-
We are expecting an upward correction from the current levels.
Want free follow-ups to the above article and details not available to 99%+ investors? Sign up to our free newsletter today!
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.