Briefly:
Intraday trade: Our Monday's intraday trading outlook was neutral. It proved partly accurate. The S&P 500 gained 0.5% following higher opening of the trading session (+0.4%). Overall, the intraday trading range was relatively tight following daily gap-up opening. The S&P 500 index got close 2,700 mark on Monday. We still can see technical overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market again, 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 gained between 0.5% and 0.8%, extending their Friday's rally, as investors reacted to economic data, tax cuts plan releases, among others. The S&P 500 index reached new all-time high at the level of 2,694.97, before closing at around 2,690. The Dow Jones Industrial Average gained 0.6% and reached new all-time high of 24,876.07. The technology Nasdaq Composite was relatively stronger again, as it gained 0.8% and reached new all-time high at 7,003.89. The nearest important level of support of the S&P 500 index is now at 2,680-2,685, marked by yesterday's daily gap up of 2,679.63-2,685.92. The next support level is at 2,670, marked by recent consolidation. The level of support is also at 2,640-2,650, marked by the December 8 daily gap up of 2,640.99-2,644.10. On the other hand, resistance level is at around 2,695-2,700, marked by new all-time high. There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:
S&P 500 Futures Just Below 2,700 Mark
Expectations before the opening of today's trading session are slightly positive, with index futures currently up 0.1-0.2% vs. their Monday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Building Permits, Housing Starts at 8:30 a.m. The market expects that Building Permits were at 1.27M, and Housing Starts were at 1.25M in November. The S&P 500 futures contract trades within an intraday consolidation, as it extends its yesterday's fluctuations along new record high. The nearest important level of support is at now around 2,690, marked by short-term consolidation, and the next support level is at 2,680-2,685, marked by yesterday's overnight low. On the other hand, resistance level is at round 2,700. The futures contract continues to trade slightly below the level of 2,700, as the 15-minute chart shows:
Still Close To Record High
The technology Nasdaq 100 futures contract follows a similar path, as it trades along new record high. It continues to trade above the level of 6,500. The nearest important level of support is at around 6,510-6,520, and the next support level is at 6,490-6,500, marked by the yesterday's daily gap up. The Nasdaq 100 futures contract trades along new record high, 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 yesterday, as it broke above $175 mark. The nearest important support level remains at around $170, marked by the early November daily gap up. Will uptrend continue? Or is this still just over-month-long topping consolidation?
The Dow Jones Industrial Average daily chart shows that blue-chip index extends its long-term uptrend, despite some 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. We can see potential two-month-long rising wedge pattern:
Concluding, the S&P 500 index continued its Friday's rally yesterday, as it got closer to 2,700 mark. The broad stock market has reached yet new record high following economic data, tax cuts plan releases. 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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