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The S&P 500 Index dropped -0.08% on Wednesday, reversing earlier gains as US benchmark indices fluctuated around all-time record highs.
The previous day’s comments from Federal Reserve Head, Janet Yellen, had stock markets off to a head start, however, that rally petered out as the session went on.
Despite another dose of dovish comments from the Fed, stock gains among US retailers were largely offset by losses in technology shares, Hewlett-Packard Co. and Apple Inc.
Hewlett-Packard Co. dropped 10% after the company said its sales would be heavily impacted by the stronger US dollar. Meanwhile, Apple shares fell back 2.6% and Chesapeake Energy Co. tumbled 9.6% on worse than expected earnings results. The most positive sector from the day was the US retail industry and there were gains seen across the board including steady advances for Dollar Tree Inc. and TJX Cos.
In terms of economic data, latest figures revealed that new homes in America were being sold at the fastest rate since January, giving mores substance to the housing recovery. Other than that, it was a relatively quiet session on the data front.
Technicals & Outlook
Looking at the technicals now and it was another subdued session for the benchmark as the S&P 500 Index competes with record high valuations. The index traded around the pivot of 2,112 for most of the day and this gave technical traders very few opportunities to eke out a profit.
With the markets now poised at all-time highs we are taking a bearish bias on the index over the next few days and see potential for a move lower to 2,090. There is a good chance the pattern is an ending diagonal [1,2,3,4,5] because the rally at the end of December was in three legs [a,b,c (circle)]. In an ending diagonal each wave is in three waves. The decline in January was wave 2, the current rally is wave 3 nearing an end. We will be looking to sell in the 2,110 to 2,129 range. We are also bearish over longer term horizons and see a potential move down to 2,040 developing over the next few weeks.
Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk
