Briefly:

Intraday trade: The S&P 500 index gained 1.1% on Thursday, after opening 0.3% lower. The broad stock market will probably open lower again today. We may see more short-term fluctuations following the recent sell-off.

Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.

Our short-term outlook is neutral, and our medium-term outlook is neutral:

Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes gained 0.8-1.7% on Thursday, retracing some of their short-term decline, as investors' sentiment improved again. The S&P 500 index got back above 2,700 mark after breaking below its Wednesday's daily low. The broad stock market has extended the short-term downtrend. The index was 11.5% below September the 21st record high of 2,940.91 two weeks ago. And now it trades 7.2% below the all-time high. The Dow Jones Industrial Average gained 0.8% and the Nasdaq Composite gained 1.7% on Thursday.

The nearest important level of resistance of the S&P 500 index remains at around 2,750-2,775, marked by the recent support level. The next resistance level is at 2,795-2,800, marked by Friday's daily gap down of 2,794.10-2,794.99, among others. The resistance level is also at 2,815-2,820, marked by the mid-October local high of 2,816.94. On the other hand, the support level remains at 2,700, marked by the previous short-term consolidation. The next support level is at 2,685, marked by the late October daily gap up. The support level is also at 2,600-2,630, marked by the late October lows.

The broad stock market extended its downtrend around three weeks ago, as the S&P 500 index fell closer to 2,600 mark. Then it bounced sharply and accelerated higher. More than a week ago the index bounced off its mid-October local high and then it quickly reversed the uptrend, as big cap tech stocks led the way lower. On Wednesday and on Thursday the index fell below 2,700 and it is trading below the long-term upward trend line again:

Negative Expectations, Downward Correction?

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.5-1.2% below their Thursday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements this morning: Industrial Production, Capacity Utilization Rate at 9:15 a.m. The broad stock market will likely extend its short-term consolidation. We may see another attempt at bouncing off the support level of around 2,700. However, there have been no confirmed short-term positive signals so far.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of its yesterday's advance. The nearest important level of resistance is now at around 2,730-2,735, marked by some recent local highs. On the other hand, the support level is at 2,690-2,700, among others. The futures contract remains below its recent local highs, as we can see on the 15-minute chart:

Nasdaq Leads Lower This Morning

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its yesterday's advance. Investors react to yesterday's after-hours' worse-than-expected quarterly earnings release from NVIDIA Corp., among other factors. The market accelerated the short-term downtrend following breaking below 7,000 mark recently. And the resistance level remains at 6,900-7,000. On the other hand, the support level is at 6,750-6,800. The Nasdaq futures contract trades along the broken short-term downward trend line, as the 15-minute chart shows:

Apple, Amazon - Reversals or Just Dead Cat Bounces?

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock accelerated the downtrend on Monday following breaking down below the support level of around $200. It was relatively weaker than the broad stock market recently, as investors continued to react to the quarterly earnings release. The stock fell the lowest since July. The nearest important level of support is at $185. We may see an attempts at bouncing off that support level:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its sell-off following quarterly earnings release in the late October. The stock continued lower, but then it bounced off the support level of $1,500. The price reached a potential resistance level of around $1,750-1,800 before reversing lower. Yesterday the stock retraced some more of its recent advance. For now, it looks like a downward correction:

Dow Jones Continues Trading Above 25,000

The Dow Jones Industrial Average fell below 25,000 mark yesterday, before bouncing off the support level and closing higher. Recently it accelerated above 26,000 mark and got closer to the early October topping consolidation. Then the blue-chip stocks gauge retraced most of the rally. The nearest important level of resistance is now at 25,750-26,000, and the support level remains at 24,750-25,000:

The S&P 500 index extended its short-term downtrend yesterday before bouncing off the support level and closing higher, So will the market continue higher? It will likely fluctuate following some worse-than-expected quarterly corporate earnings. The broad stock market index continues to trade above the support level of the October the 31st daily gap up.

Concluding, the S&P 500 index will probably open lower today, as investors' sentiment worsens despite yesterday's advance. For now it looks like consolidation within a downtrend. We may see more short-term volatility.

Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist