Briefly:
Intraday trade: Our Wednesday's intraday trading outlook was neutral. It proved accurate because the S&P 500 index lost 0.03%, following slightly higher opening of the trading session. The market broke above its short-term consolidation on Tuesday. We still can see negative technical divergences along with medium-term overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market today, avoiding low risk/reward ratio trades.
Our intraday outlook is neutral today. Our short-term outlook is neutral, and our medium-term outlook is neutral:
Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral
The main U.S. stock market indexes were mixed between -1.3% and +0.4% on Wednesday, as investors took some technology stocks profits off the table. The S&P 500 index has reached new record high at the level of 2,634.89, before closing virtually flat (-0.03%). The Dow Jones Industrial Average was relatively stronger, as it gained 0.4%. It reached new record high at the level of 23,959.76. The technology Nasdaq Composite was relatively very weak vs. the broad stock market, as it lost 1.3% yesterday. The nearest important level of support of the S&P 500 index remains at 2,600-2,610, marked by recent resistance level. The next level of support remains at around 2,590, marked by last Tuesday's daily gap up of 2,584.64-2,589.17. The support level is also at 2,570-2,575, marked by short-term local lows. On the other hand, potential resistance level is at around 2,630-2,635, marked by new all-time high. Will the S&P 500 index continue higher? Or is this some topping pattern before medium-term downward correction? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:
Positive Expectations
Expectations before the opening of today's trading session are positive, with index futures currently up between +0.2% and +0.3% vs. their yesterday's closing prices. The European stock market indexes have gained 0.2-0.8% so far. Investors will wait for some economic data announcements: Initial Claims, Personal Income Personal Spending, Core PCE Price Index at 8:30 a.m., Chicago PMI at 9:45 a.m. The market expects that Personal Income grew 0.3% and Personal Spending grew 0.2% in October, and the Chicago PMI number was at 62.2 in November. The S&P 500 futures contract trades within an intraday uptrend, as it retraces its yesterday's move down. The market is close to record high above the level of 2,630. The nearest important level of support is at around 2,620-2,625, marked by recent fluctuations. The next support level is at 2,600-2,610, marked by previous level of resistance. The futures contract trades above its short-term upward trend line, as the 15-minute chart shows:
Nasdaq Well Below Record High
The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its yesterday's sell-off. However, it remains well below its recent all-time high. The nearest important level of resistance is at around 6,330, marked by short-term local high. The next resistance level is at 6,380-6,400, marked by previous support level. On the other hand, support level is now at 6,280-6,300, among others. The Nasdaq 100 futures contract trades within a short-term consolidation following yesterday's sell-off, as we can see on the 15-minute chart:
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The price reached new record high on November 8, as it extended its uptrend following better-than-expected quarterly earnings release. Since then it fluctuates below its record high. Is this a topping pattern or just consolidation before another leg up? The price is at the support level, marked by the early November daily gap up:
The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index broke above its recent consolidation and reached new record highs. Will it continue higher? Or is this some topping pattern? We still can see negative technical divergences. The most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low:
Concluding, the S&P 500 index remained unchanged yesterday, despite relatively deep technology stocks sell-off. The broad stock market continued to fluctuate along its new record high following recent breakout above month-long consolidation. We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far.
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Thank you.
Paul Rejczak
Stock Trading Strategist
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