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The S&P 500 Index fell -0.73% on Wednesday, capping four days of solid gains as stocks drifted lower across the board and crude oil plunged to another two-year low.
A report from the Energy Information Administration (EIA) revealed that oil inventories increased more than expected last week and this saw the commodity slump -2.4%.
Unsurprisingly, energy producers were hit the hardest with the energy sector falling -1.7% on average. 8 out of 10 sectors in the S&P 500 fell and Boeing shares dropped -4.5% to bring down industrials.
Meanwhile, US CPI also came out higher than expected, indicating that the cost of living in the US has gone up. A perceived terror threat in Canada also hit investor sentiment as it was revealed that a soldier had been shot dead in Ottawa. This led to a shutdown of Canadian parliament and turbulence in Canadian stocks. However, most Canadian markets recovered by the end of trading.
Price action
The S&P 500 opened in positive territory on Wednesday but four days of strong gains came to an abrupt end as the US session got underway. The index drifted lower between the first resistance and pivot but eventually closed on the pivot around the 1,930 level.
Outlook
Looking ahead, we mostly see the main equity indexes moving lower from here and view the recent rally as a short-term rebound in the midst of a more prolonged downward move.
We feel that pressure is biased towards the down-side over the next few days although technical indicators are fairly mixed.
Elliott wave B, market sentiment and MACD are all bearish and we advise selling in the 1,950-2,019.5 range for a move down to 1,880.
On a longer time-frame (next few weeks) we note that price action and technical indicators are significantly more bearish and we are looking for a move down as far as 1,750.
Thierry Laduguie is Trading Strategist at www.bettertrader.co.uk
