Another choppy trading day is expected on U.S. markets on Wednesday, in the wake of poor performance in Asia and Europe.
U.S. stock index futures indicate a slight decline at the open.
On Tuesday, markets came back slightly toward the end of the day, after Federal Reserve Chairman Ben Bernanke said not to expect a double-dip recession. The S&P 500 twice bounced off the key support level of 1040. But buyers stayed in, lifting all the sectors except tech, which floundered due to comments about poor demand from semiconductor analysts.
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Markets Tuesday
- Dow Jones Industrials (.DJI): up 1.26% or 123.49 points to 9,939.38.
- S&P 500(.INX): up 1.10% or 11.53 points to 1062.0
- Nasdaq(.IXIC): down 0.15% or 3.33 points to 2170.57
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Sentiment is poor on all world markets, with concerns about the European debt crisis keeping investors away from equities. Japan’s Nikkei 225 Index dropped 0.98%, while South Korea and Australia were flat. In Europe, the CAC 40 opened flat; the DAX did the same while London’s opening was also lackluster.
In the U.S., a poll by CNBC showed that 40% of investors still don’t like the looks of the stock markets. It is notable that gold hit a new high of $1,254 an ounce on Tuesday, while oil remained at around $71 per barrel, down from its recent 18-month high of $87.
Many technical analysts think that the support level for the S&P 500 at 1040 will give way, allowing a drop to about 1030. It is notable that the index is only two points away from having the 20-day cross the 200-day moving average. That’s a downward-moving signal.
Some think that the S&P will hold at 1030, and then come back higher to hit resistance just above 1100. But there is an equally important school of bears, who point to a head-and-shoulders pattern that suggests a further fall is in store. As one trader put it: “All those red candles on the charts show you what the market is thinking.”
All of this suggests that choppy conditions will prevail for the rest of the week, at least. There is also increasing talk about bottom-fishing, which could provide some support, particularly on the Russell which is expected to fall to below 600, a level that will whet the appetites of buyers.