Apr 17, 2015, (9:25AM EDT)
Highly negative U.S. stock futures are indicating a gap down opening in U.S. markets today. Will it translate into the start of a correction in these markets, as predicted by some analysts?
To know that, traders would need to watch some major support levels in prominent indexes. Only a closing below these levels will indicate mounting selling pressure in U.S. markets and only a confirmation of this negative pressure next week will confirm a correction.
Major U.S. indexes have been confined in a strict range for many months now. This range has many smaller sub-ranges. For Dow Jones, the upper part of this range is made up between 18,200 and 17,950 levels. If Dow Jones closes below this “floor” (17,950) then only bears can look forward to more gains in coming sessions. 17,770 and 17,650 will make next support levels for the index.
For S&P 500, levels of 2094 and 2088 make great support. Until these levels are intact, bears are not going to flock this index and it will continue to trade in its higher range. However, if S&P 500 falls below 2088, then 2070 and 2045 will be its next support stops.
For Russell 2000,a major support comes near 1266 and don’t expect any negative trend in this index till it closes below the given level.
4376 makes a strong supportive floor for Nasdaq 100. Below this level the index will find support only near 4344 and 4288 levels.
Watch out for these support levels, give markets some time to settle after a gap down opening and then, if major indexes fail to sustain any recovery, trade with the negative trend.
Good luck, enjoy the session.