Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains neutral, following S&P 500 index breakout above last year's all-time high:
Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): neutral
Long-term outlook (next year): neutral
The main U.S. stock market indexes were mixed between 0.0% and +0.7% on Wednesday, extending their short-term fluctuations, as investors reacted to economic data announcements, among others. The S&P 500 index fell the lowest since end of May on Thursday a week ago, as it got closer to support level of 2,400. It is now trading around 0.9% below its June 19 all-time high of 2,453.82. It has reached new record high after a breakout above short-term consolidation along the level of 2,420-2,440. Stocks have rebounded sharply following their mid-May quick two-session sell-off and continued over eight-year-long bull market off 2009 lows. The Dow Jones Industrial Average was relatively weaker yesterday, as it was unchanged. It continues to trade close to the level of 21,500. The technology Nasdaq Composite was relatively stronger than the broad stock market, as it gained 0.7%. It has retraced most of its Monday's decline. The nearest important support level of the S&P 500 index is at around 2,415-2,420, marked by some recent local lows. The next support level is at 2,400-2,410, marked by the May 25 daily gap up of 2,405.58-2,408.01, among others. On the other hand, level of resistance is at 2,425-2,430, marked by some recent fluctuations. The next resistance level remains at 2,450-2,455, marked by all-time high. There have been no confirmed negative signals so far. However, we can see overbought conditions and negative technical divergences. The S&P 500 index is trading within its a month-long consolidation, as we can see on the daily chart:
Downside Pressure
Expectations before the opening of today's trading session are negative, with index futures currently between -0.6% and -0.3% vs. their Wednesday's closing prices. The European stock market indexes have lost 0.7-1.0% so far. Investors will now wait for some economic data announcements: ADP Employment Change number at 8:15 a.m., Initial Claims, Trade Balance at 8:30 a.m., ISM Services at 10:00 a.m., Crude Inventories at 11:00 a.m. The market expects that the ADP Employment Change was at +185K in June, and ISM Services number was at 56.6. The S&P 500 futures contract trades within an intraday downtrend, as it trades slightly below its recent consolidation. The nearest important level of resistance is at around 2,425-2,430, marked by local highs. The next resistance level is at 2,440-2,450, marked by record high. On the other hand, support level is at 2,400-2,415, marked by Thursday's local low. Which direction is next? Will the market break continue its downtrend?
Tech Stocks Fluctuate
The technology Nasdaq 100 futures follows a similar path, as it retraces its yesterday's advance. It continues to trade within a short-term consolidation after last week's move down. The nearest important level of resistance is at around 5,640-5,660, and the next resistance level is at 5,690-5,700, marked by recent local high. On the other hand, support level is at 5,550, marked by local lows, as the 15-minute chart shows:
Concluding, the S&P 500 index extended its short-term consolidation on Wednesday, as it remained around 1% below record high. Is this a topping pattern before some medium-term downward correction? Or just flat correction within an uptrend, before another leg up? There have been no confirmed negative signals so far. However, we still can see negative technical divergences, along with some medium-term overbought conditions.
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Paul Rejczak
Stock Trading Strategist
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