Briefly:

Intraday trade: Our Monday's intraday outlook was neutral. The S&P 500 index gained 0.3% after opening 0.5% higher. The market continued to fluctuate within its over two-week-long consolidation. Expectations before the opening of today's trading session are very positive, so we may see another attempt at breaking above recent trading range. However, the market is close to resistance level. 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 U.S. stock market indexes gained 0.2-0.5% on Monday, as investors sentiment slightly improved after Friday's sell-off. However, there was an intraday move down after reaching recent local highs. The S&P 500 index gained 0.3% and is now trading 9.0% below its January 26 record high of 2,872.87. The Dow Jones Industrial Average gained 0.2%, and the technology Nasdaq Composite gained 0.5% yesterday.

The nearest important level of resistance of the S&P 500 index is at around 2,650-2,655, marked by recent local highs. The next resistance level is at 2,675, marked by previous week's local high. The resistance level is also at 2,695-2,710, marked by March 22 daily gap down of 2,695.68-2,709.79. On the other hand, level of support is now at 2,600-2,610, marked by yesterday's daily low, among others. The next level of support is at 2,585, marked by Friday's daily low.

We can see that stocks reversed their medium-term upward course following whole retracement of January euphoria rally. Then the market bounced off its almost year-long medium-term upward trend line, and it retraced more than 61.8% of the sell-off within a few days of trading. The uptrend reversed in the middle of March, and stocks retraced almost all of their February - March rebound. The index got back down to its medium-term upward trend line. There are still two possible future scenarios. The bearish one, leading us to February low or lower after breaking below medium-term upward trend line, and bullish: medium-term double top pattern or breakout higher. Friday's sell-off made the bearish case more likely again. However, the broad stock market index continues to trade within a short-term consolidation along the above-mentioned upward trend line:

Very Positive Expectations, but What's Next?

Expectations before the opening of today's trading session are very positive, because the index futures contracts gain 1.1-1.6% vs. their Monday's closing prices. The European stock market indexes have gained 0.5-1.1% so far. Stocks will likely open at their resistance level, so short-term upside seems limited. Will the market break above over two-week-long trading range today? We may see some more uncertainty. Investors will wait for the economic data announcements this morning: Producer Price Index at 8:30 a.m., Wholesale Inventories at 10:00 a.m. Investors will also wait for coming quarterly corporate earnings releases.

The S&P 500 futures contract trades within an intraday consolidation following an overnight rally. The nearest important level of resistance is at around 2,650-2,655, marked by local highs. The next resistance level is at 2,670. On the other hand, support level is now at 2,610-2,620, and the next level of support remains at 2,585-2,600. The futures contract trades just below the level of 2,650, as we can see on the 15-minute chart:

Nasdaq Back At 6,600 Mark

The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates after an overnight advance. The market is back at the level of 6,600 again, following last week's sell-off to 6,300. We still see an increased volatility. Will tech stocks break above their recent trading range or is this just some flat correction before breaking down? Bulls have a chance at breaking above short-term consolidation today. The Nasdaq futures contract is above its short-term downward trend line, but it continues to trade below last week's Thursday's local highs, as the 15-minute chart shows:

Apple, Amazon - No Major Changes

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The market extends its short-term consolidation following March move down. It continues to trade above the support level of $165, and below the resistance level of $170-$175. Is this some bottoming pattern before upward reversal? If the market breaks higher, it could retrace more of March sell-off and get close to record high again:

Now let's take a look at Amazon.com, Inc. (AMZN) daily chart. The price bounced off its medium-term upward trend line on Wednesday and continued higher on Thursday last week. It reversed its upward course on Friday following a bounce off resistance level, marked by late March daily gap down. So, there was a selling pressure at $1,450-1,500. The nearest important support level is at around $1,400. The support level is also at $1,350, marked by the above-mentioned trend line:

Dow Jones Remains Below 24,000

The Dow Jones Industrial Average formed a positive "Harami" candlestick pattern on Tuesday last week. Then, the market confirmed this reversal pattern despite lower opening of Wednesday's trading session. DJIA continued higher on Thursday, as it broke above its two-week-long trading range but it reversed its short-term uptrend on Friday. Will it come down to recent lows and the support level of 23,500? Or is this just downward correction before another leg higher? For now, it looks like a downward correction because the above-mentioned upward reversal pattern is still valid:

Concluding, the S&P 500 index is expected to open much higher today, as investors' sentiment improved after an overnight speech from the Chinese President. However, the market is at its short-term resistance level again and it may move sideways for some time, unless there is an additional sentiment improvement. The coming quarterly corporate earnings releases are potentially positive for the market.

The early March rally failed to continue following monetary policy tightening, trade war fears, negative political news. What was just profit-taking action, quickly became a meaningful downward reversal. Breakdown below over-month-long rising wedge pattern made medium-term bearish case more likely, and after some quick consolidation, the index accelerated lower, towards its early February low. 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. However, recent fluctuations may be some bottoming pattern before an upward reversal.

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