Markets Recovering toward Key Near-term Resistances
The stock market rebounded strongly today, boosted by the favorable Evergrande debt news and by Chairman Powell's mostly neutral stance, moderating between hawkish and dovish statements.
As expected, FOMC kept the target range for the Fed Funds rate unchanged at 0% to 0.25%. The committee also maintained its monthly asset purchases of $120 billion asset purchases. However, the Fed is warming up to tapering. Powell noted the tapering or reducing the pace of the asset purchases may soon be warranted later in the year. Powell mentioned the state of the economy will dictate the pace of the tapering and the timing of the hiking of interest rates.
Looking at the market actions over the past few days, it appears investors are mostly mixed – some remain cautious, while others are optimistic.
From a technical perspective, market indexes are nearing crucial initial resistances, corresponding to the 50-day moving average (ma), 9/20/21 gap-down, trendline breakdowns, short-term downtrends, and Fibonacci retracements. The ability to break out about these resistances signals sustainable recoveries back to their respective highs. However, failure to surpass these resistances may trigger another sell-off.
Enclosed below are the key resistances for major market indexes.
S&P 500 Index (SPX – 4,395.64)
Key initial resistance = 4,426-4,454 (50-day ma, top of 9/20/21 gap-down, Apr/May 2021 uptrend breakdown, Sep 2021 downtrend, and 50-61.8% retracement from Sep 2021 decline
Secondary resistance = 4,486.87 (9/15/21 high)
Key initial support = 4,306.91 (9/20/21 low)
Dow Jones Industrial Average (INDU – 34,258.32)
Key initial resistance = 34,339.5-34,564 (9/20/21 gap-down and the 38.2-50% retracement from 8/30/21 to 9/20/21 decline
Secondary resistance = 34,653-34,788 (Mar 2021 uptrend breakdown, Sep 2021 downtrend, and the 61.8% retracement from 8/30/21-9/20/21
Medium-term resistance = 34,990-34,995.5 (9/14/21 high and 50-day ma)
Key initial support = 33,613.03 (9/20/21 low)
Nasdaq Composite Index (COMPQ – 14,896.85)
Initial resistance = 14,967-14,999 (50% retracement from the top of 9/20/21 gap-down)
Secondary resistance = 15,057-15,070 (Sep 2021 downtrend and 61.8% retracement from Sep 2021 decline)
Medium-term resistance = 15,205.50 (9/16/21 high and potential right shoulder)
Key initial support = 14,530.07 (9/20/21 low)