Briefly:

Intraday trade: Our Monday's intraday outlook was neutral. The S&P 500 index was unchanged after opening 0.2% higher. Our yesterday's intraday outlook has proved accurate. We may see a short-term rebound today, but the market will likely fluctuate within its last Friday's trading range. Therefore, we prefer to be out of the market, avoiding low risk/reward ratio trades.

Medium-term trade: In our opinion, no medium-term positions are justified.

Our intraday outlook is neutral. 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 -0.3% and 0.0% on Monday, as investors hesitated following Thursday-Friday move down. The S&P 500 index basically remained within its Friday's daily trading range. It currently trades 7.1% below its January 26 record high of 2,872.87. The Dow Jones Industrial Average lost 0.1% and the technology Nasdaq Composite lost 0.3% yesterday.

The nearest important level of resistance of the S&P 500 index remains at around 2,685-2,695, marked by previous support level (last Tuesday's daily gap up of 2,686.49-2,692.05). The next level of resistance is at 2,700-2,705, marked by Thursday's daily gap down of 2,702.84-2,703.63. The resistance level is also at 2,715-2,720, marked by last Wednesday's daily high. On the other hand, the nearest important support level is now at 2,660-2,665, marked by recent local lows. The support level is also at 2,645-2,650.

Stocks remain in the middle of their over two-month-long consolidation following early February sell-off. The market bounced off its year-long medium-term upward trend line few weeks ago. Is this a bottoming pattern before another leg higher within the long-term bull market? Or just pause before another wave of selling? So, there are still two possible future scenarios - bearish that will lead us below February low following trend line breakdown, and the bullish one in a form of medium-term double top pattern or breakout towards 3,000 mark. Stocks bounced off the resistance level in the middle of last week, and the index trades below 2,700 mark again:

Positive Expectations, Breakout?

The index futures contracts are trading 0.5-0.6% higher vs. their yesterday's closing prices following after-hours Alphabet, Inc. (GOOG) quarterly earnings release. So, expectations before the opening of today's trading session are positive. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Conference Board Consumer Confidence number, New Home Sales, Richmond Manufacturing Index at 10:00 a.m. Stocks may continue to fluctuate following Friday's decline. Investors' sentiment improved after yesterday's quarterly corporate earnings, but investors will wait for more important earnings releases this week.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces its yesterday's intraday move down and reaches new local highs. The nearest important level of resistance is at around 2,685-2,700, marked by short-term consolidation. The next resistance level is at 2,710-2,720. On the other hand, level of support is at 2,655-2,660, marked by local lows. The futures contract trades above its recent downward trend line, as we can see on the 15-minute chart:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it retraces yesterday's intraday move down. It has bounced off support level at around 6,600-6,620. Will it continue higher ahead of series of earnings releases? It seems like a quite likely scenario. However, the nearest important level of resistance is at around 6,730, marked by yesterday's local high. On the other hand, support level is at 6,680-6,700, marked by recent fluctuations. The Nasdaq futures contract is above the level of 6,700 again, as the 15-minute chart shows:

Apple at Support Level, Alphabet Inconclusive After Earnings Release

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It sold off on Friday, following Thursday's move down, and it slightly extended the downtrend yesterday. The market bounced off resistance level of $180 early last week, and it currently trades close to support level of $165. Apple will release its earnings report on May 1, so expectations before that release seem to be quite negative. Will we see some "sell the rumor, buy the fact" action? The short-term downtrend will probably pause here:

Now let's take a look at Alphabet, Inc. stock (GOOG) daily chart. This company has released its quarterly earnings yesterday after-hours. Investors' reaction is muted so far (+0.7% in pre-session trading). The nearest potential resistance level is at around $1,120, marked by March daily gap down. On the other hand, support level remains at $1,040-1,050, marked by daily gap up. We can see medium-term fluctuations. Long-term topping pattern or just consolidation before another leg higher?

Dow Jones Still at Broken Trend Line

The Dow Jones Industrial Average broke above its medium-term downward trend line, and it got closer to 25,000 mark in the middle of last week. Since then, we are seeing a downward correction. The blue-chip index got back to its medium-term downward trend line. Will it act as a support level? It looks like the market could bounce here:

The broad stock market retraced some of its early April move up in the last trading days. Is this a new downtrend or just quick downward correction? It looks like this is just a correction and we may see another wave of buying following quarterly earnings releases. However, we are still within a medium-term consolidation following early February sell-off. It is more likely than not, that this is just some extended flat correction before another leg within a downtrend. Just like we wrote in our several Stocks Trading Alerts, the early February sell-off set the negative tone for weeks or months to come.

Concluding, the S&P 500 index will likely retrace some of its Friday's decline today. Will we see an upward reversal? Probably not, just more fluctuations ahead of quarterly earnings releases. There are still worries about tightening monetary policy, trade war outcome. However, better-than-expected earnings releases may outweigh other economic news in the coming days.

Currently, we prefer to be out of the market, avoiding low risk/reward ratio medium-term trades. We will let you know when we think it is safe to get back in the market.

To summarize: no medium-term positions are justified from the risk/reward perspective at this moment.

Intraday trade:

No intraday position is justified from the risk/reward perspective today.

No medium-term position is justified from the risk/reward perspective at this moment.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts