Briefly:
Intraday trade: Our Monday's intraday trading outlook was neutral. It proved partly accurate because the S&P 500 gained just 0.3% following slightly higher opening of the trading session. The index extended its short-term uptrend, as it got closer to last week's Monday's all-time high. There have been no confirmed negative signals so far. However, we can see some short-term technical overbought conditions. Therefore, intraday short position is favored today. Stop-loss is at the level of 2,675 and potential profit target is at 2,635 (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 0.2-0.5% on Monday, extending their Friday's advance following better-than-expected monthly jobs data release. The S&P 500 index got closer to its last Monday's record high of 2,665.19. It currently trades just 0.2% below that level. The Dow Jones Industrial Average gained 0.2%, and the technology Nasdaq Composite was relatively stronger than the broad stock market, as it gained 0.5%. The nearest important level of support of the S&P 500 index is at around 2,650, marked by yesterday's daily low. The next support level is at 2,640, marked by Friday's daily gap up of 2,640.99-2,644.10. The support level is also at around 2,625, marked by short-term local low. On the other hand, resistance level is at around 2,665, marked by all-time high. Will the S&P 500 index continue its uptrend? Or is this some volatile 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:
Flat Expectations
Expectations before the opening of today's trading session are virtually flat, with index futures currently between -0.05% and +0.1% vs. yesterday's closing prices. The European stock market indexes have gained 0.1-0.2% so far. Investors will wait for the Price Producer Index release at 8:30. The market expects that it grew 0.4% in November. The S&P 500 futures contract trades within an intraday consolidation following yesterday's move up. The market trades along its record high. The nearest important level of resistance is at around 2,665. On the other hand, support level is at 2,650-2,655, marked by recent fluctuations. The next support level is at 2,630-2,640, among others. The futures contract trades above its short-term upward trend line, as we can see on the 15-minute chart:
Nasdaq Below Record High
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. However, it is still relatively weaker than the broad stock market. It trades around 0.5% below its late November all-time high. The nearest important level of support is at around 6,340-6,360, marked by short-term fluctuations. The next level of support is at 6,300-6,320. On the other hand, resistance level is at 6,420-6,430. The Nasdaq 100 futures contract trades along the level of 6,400, as the 15-minute chart shows:
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The price reached new record high a month ago on, as it extended its uptrend following better-than-expected quarterly earnings release. Since then it fluctuated along the level of $170. The price bounced off support level of the early November daily gap up yesterday. Will it continue higher despite some negative technical divergences?
The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index continues to fluctuate along its last week's new record high. It is extending its week-long consolidation. 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 gained 0.3% on Monday, as it slightly extended its Friday's move up. Will uptrend continue today? Or is this some topping pattern before 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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Thank you.
Paul Rejczak
Stock Trading Strategist
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