S&P 500 completes bearish pattern

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The S&P 500 fell by -0.09% on Wednesday as shares dropped across the board after the release of last month’s Federal Reserve meeting minutes. The Dow Jones Industrial Average also fell, by 0.15%, while the Nasdaq finished up by just a modest amount.

© Mike Hodges

As Fed minutes were released, the S&P 500 had actually entered into new record territory, however, the gains were not sustained and the index fell back to close at 2,125.85 by 4 pm.

Although there was nothing out of the ordinary from the latest meeting minutes, investors and traders were still left uncertain as to the timing of future rate rises. Meanwhile, most data releases continued to paint a mixed picture of the broader economy.

Data from the US Commerce Department indicated a rise in housing starts on Tuesday but that was offset by disappointing readings for consumer demand, manufacturing and business investment. Furthermore, a business poll by Reuters revealed that the large majority of economists are unsure about the timing of future rate hikes.

Airlines & Banks

While traders continue to reflect on recent economic uncertainty, the airline sector was one sector that finished firmly in the red on Wednesday. Southwest Airlines, one of the day’s biggest losers, sank 9.09% after reporting a quarterly decline in passenger revenues.
Meanwhile, banks were also down across the board as four of the major financial players were hit by penalties relating to the manipulation of currency rates.

Technicals & Outlook

SPX traded between the first resistance and first support on Wednesday but struggled to hold gains towards the end of the session and was trading lower in after hours.

Looking ahead over the next few days, we note that most technical indicators are now mixed and we see potential for a move down to 2,100 – continuing the short-term downward momentum. Yesterday’s price action supports this view. The S&P produced a key reversal day at the end of a fifth wave, this is when prices make a new high and then close is in the lower third of the day’s range. This is a bearish pattern. We are also bearish over the next few weeks and see the potential for a move down to 2,070.

Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk

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