Briefly:
Intraday trade: The S&P 500 lost 0.3% on Thursday, after opening 0.1% lower. The market will probably open higher today. We may see an attempt at breaking above the recent trading range following the global stocks markets' advance.
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 lost 0.3% on Thursday, as investors continued to hesitate following the recent advances. The S&P 500 index retraced more of its October-December downward correction of 20.2% on Monday. It got closer to the previous local highs along the 2,800 level. Both the Dow Jones Industrial Average and the Nasdaq Composite lost 0.3% yesterday.
The nearest important resistance level of the S&P 500 index remains at around 2,800-2,820, marked by the previous medium-term local highs. On the other hand, the support level is at around 2,765-2,780, marked by the recent local lows. The support level is also at the previous Friday's daily gap up of 2,757.90-2,760.24.
The broad stock market retraced all of its December sell-off and it got close to the medium-term resistance level of around 2,800, marked by the October-November local highs. So is it still just a correction or a new medium-term uptrend? The market broke above the 61.8% Fibonacci retracement of the 20% decline. And we may see an attempt at getting back to the record highs. But will the index break above the mentioned previous local highs? There have been no confirmed negative signals so far:
Positive Expectations
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.5-0.6% above their Thursday's closing prices. The European stock market indexes have gained 0.6-1.1% so far. Investors will wait for some economic data announcements today: Personal spending, Personal Income, Core PCE Price Index at 8:30 a.m., ISM Manufacturing PMI, Michigan Sentiment at 10:00 a.m. The broad stock market will likely extend its short-term consolidation. However, we may see an attempt at breaking above the recent trading range.
The S&P 500 futures contract trades within an intraday uptrend, as it extends its overnight advance. The nearest important resistance level is at around 2,810-2,815, marked by the short-term local high. On the other hand, the support level is now at 2,785-2,790. The futures contract trades above its short-term downward trend line, as the 15-minute chart shows:
Nasdaq Also Higher
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market gained more than 1,300 points from December the 26th local low of around 5,820. The nearest important resistance level is at around 7,150-7,170. The next resistance level is at 7,200-7,250, marked by some previous local high. The support level is at 7,100, marked by the recent resistance level. The Nasdaq futures contract gets closer to the recent local high, as we can see on the 15-minute chart:
Big Cap Tech Stocks Still Going Sideways
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke above its January's trading range and the resistance level of $155-160 following the quarterly earnings release. It retraced some more of its November-December sell-off. But then it bounced off $175. On Monday the market came back to the local high but then we saw some profit-taking action. There have been no confirmed negative signals so far:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The market broke above one of its three-month-long downward trend lines two months ago. Since then it has been going sideways. There is a resistance level at around $1,700-1,750. Recently it bounced off that resistance level following the quarterly earnings release. The stock got closer to the downward trend line again, but then it came back slightly lower again. Overall, it still looks like a sideways trend:
Dow Jones Trades Along 26,000 Mark
The Dow Jones Industrial Average extended its short-term uptrend on Monday, but then it retraced that advance. Since then it has been going sideways. So will it continue even higher and reach the record high? Or reverse lower in the near term? There have been no confirmed negative signals so far:
The S&P 500 index slightly extended its recent run-up this week. It is now close to the medium term resistance level of around 2,800. Is this a new medium-term uptrend or still just upward correction before another medium-term leg lower? The market trades above the 61.8% Fibonacci retracement of the whole medium-term decline. There have been no confirmed negative signals so far.
Concluding, the S&P 500 index will likely open higher today. We may see an attempt at breaking above the recent trading range. However, we still can see some short-term technical overbought conditions.
Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.
Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
