Briefly:
Intraday trade: Our Thursday's intraday trading outlook was neutral. It proved partly accurate, because the S&P 500 gained 0.4% following higher opening of the trading session (+0.2%). The broad stock market continued its short-term uptrend, but it remained within a relatively narrow intraday trading range. There have been no confirmed negative signals so far. However, we can see some clear short-term overbought conditions along with an overly bullish investors' sentiment. Therefore, intraday short position is favored today. Stop-loss is at the level of 2,750 and potential profit target is at 2,700 (S&P 500 index).
Our intraday outlook is bearish today. Our short-term outlook is neutral, and our medium-term outlook is neutral:
Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral
The U.S. stock market indexes gained 0.2-0.6% on Thursday, as they extended their record-setting rally following Wednesday's breakout above short-term consolidation. The S&P 500 index has reached yet another new all-time high at the level of 2,729.29. The broad stock market gauge extends its almost nine-year-long bull market. The Dow Jones Industrial Average gained 0.4%, as it was relatively stronger than the S&P 500 index yesterday. The blue-chip index reached new record high at 25,105.96. The technology Nasdaq Composite slightly extended its Tuesday's rally, as it gained 0.2%. It reached new record high close to the level of 7,100. The nearest important level of support of the S&P 500 index is now at around 2,715-2,720, marked by yesterday's daily gap up of 2,714.37-2,719.07. The next support level is at 2,695-2,700, marked by recent consolidation. The support level is also at 2,680-2,685, marked by short-term local low. On the other hand, potential resistance level is at 2,730-2,750. 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 Again
Expectations before the opening of today's trading session are positive, with index futures currently up 0.3-0.4% vs. yesterday's closing prices. The European stock market indexes have gained 0.3-1.1% so far. Investors will wait for some important economic data announcements today: Nonfarm Payrolls, Unemployment Rate, Trade Balance at 8:30 a.m., ISM Non-Manufacturing PMI number, Factory Orders at 10:00 a.m. The market expects that Nonfarm Payrolls were at +190,000, and the Unemployment Rate was at 4.1% in December. The S&P 500 futures contract trades within an intraday uptrend, as it reaches new record highs ahead of the above-mentioned economic data releases. The nearest important level of support is now at around 2,720, marked by short-term consolidation. The next support level is at 2,700-2,710, among others. The futures contract continues to trade above its relatively steep upward trend line, as the 15-minute chart:
Nasdaq At New Record High
The technology Nasdaq 100 futures contract follows a similar path, as it slightly extends its uptrend this morning. The market reached new record highs above the level of 6,630. The nearest important level of support is at around 6,590-6,600, marked by recent fluctuations. The Nasdaq 100 futures contract is above its short-term upward trend line, 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 over two weeks ago, as it broke above $175 mark. It failed to continue that rally and fluctuated along the level of $175. Then, the stock fell to support level of around $170 again, marked by the early November daily gap up. It bounced off the support level on Tuesday. However, Wednesday's intraday stock price action was bearish, as it bounced off resistance level:
The Dow Jones Industrial Average daily chart shows that blue-chip index broke above its short-term consolidation on Wednesday, as it reached new record high. 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. Despite reaching new all-time highs recently, the index continues to trade slightly below two-month-long rising wedge pattern. Is this an euphoria topping pattern?
Concluding, the S&P 500 index gained 0.4% on Thursday, as it continued its record-setting rally following Wednesday's breakout above short-term consolidation. The index trades well above 2,700 mark. Will uptrend continue today? Or is this some topping pattern ahead of downward correction? 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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Paul Rejczak
Stock Trading Strategist
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