S&P 500 approaching a strong resistance area

The S&P 500 fluctuated on Wednesday and ended the session lower by -0.03% as gains in consumer goods, industrials, and utility shares were offset by losses in oil and gas, finance and telecommunications stocks.

Major US shares on the rise included American Express Co. which gained 0.89% towards the close after the company reversed losses related to Costco’s decision to withdraw American Express payments from it’s stores. Elsewhere, there were also gains for pharma company Procter & Gamble (up 0.90% and Nike Inc. (up 1.92% on the day). Overall, however, it was a quiet day for US shares which are now edging closer to record highs. Even the release of Fed meeting minutes did little to stir up momentum.

Oil stocks were also in the limelight as crude oil futures retreated 3% and moved back to $51 a barrel. Large oil and gas multinational Exxon Mobil fell at least 2% after a bad day all round. The company was on the end of falling crude, a refinery fire and this was compounded by news that Warren Buffett’s investment vehicle Berkshire Hathaway is reducing it’s almost $4 billion stake in the company. The biggest winner of the day went to Boston Scientific Corp. The company gapped higher by 12% on reports of a litigation agreement with Johnson & Johnson.

Technicals & Outlook

Looking at the technical picture now and bulls will be pleased by the way the S&P 500 recovered from early losses and finish strongly on the day. The market traded around it’s key pivot level for much of the US session before closing right on the 2,100 mark.

Looking ahead, we are now bullish in the short-term and see the risk of a trend reversal as low. The rally which is an impulse wave 5 should extend to 2,120. But any move above that level will encounter strong resistance. One indicator of market momentum, 34-day BTI is above 400. When this indicator is above 400 the odds of a decline in the medium term are high, therefore it is not recommended to remain long above 2,120.

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

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