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Stocks Deepen Losses on Fed Decision


Charts show the impact of the asset-purchasing taper on US equities.

The major US stock market indices lost between 1.0% and 1.2% as investors reacted to the FOMC's decision concerning further tapering of its asset-purchasing program. The S&P 500 Index (INDEXSP:.INX) extended its recent decline, testing the support at around 1,775, marked by some of the previous local highs and lows. The market is close to last year's upward trend line. Will it break below the line? The nearest important resistance remains at 1,800-1,810, marked by recent local highs, as we can see on the daily chart:

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Expectations before the opening of today's session are positive, with index futures currently up 0.2-0.3%. The European stock market indices have lost 0.2-0.3% so far. Investors continue to worry about the emerging markets crisis, pushing down EUR vs. USD. There will be some economic data released today: initial claims and GDP advance number at 8:30 a.m., and pending home sales at 10:00 a.m. The S&P 500 futures contract (CFD) trades near the low of its recent downtrend, testing a potential level of support at around 1,770. On the other hand, the resistance remains at 1,800.

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The Nasdaq 100 (INDEXNASDAQ:NDX) futures contract is in a similar consolidation, close to its recent low. The support seems to be at around 3,450-3,470, and the resistance is at around 3,520. For now, it looks like a flat correction within a downtrend, as the 15-minute chart shows.

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For the full version of this essay and more, visit Sunshine Profits' website.

Paul Rejczak is a stock market strategist who has been known for the quality of his technical and fundamental analysis since the late 1990s. He is interested in forecasting market behavior based on both traditional and innovative methods of technical analysis. Paul has made his name by developing mechanical trading systems. He is the author of Sunshine Profits' premium service for stock traders: Stock Trading Alerts.
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