Briefly:

Intraday trade: The S&P 500 index lost 0.6% on Thursday, after opening virtually flat. The stock market will probably open slightly higher or virtually flat today. It may extend the short-term consolidation. 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

Today's Stock Trading Alert will be shortened, we apologize for inconvenience.

The U.S. stock market indexes lost 0.6-0.9% on Thursday, retracing their recent advance, as investors' sentiment worsened once again. The S&P 500 index fell to its support level of around 2,740-2,750. It currently trades 4.2% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average lost 0.8%, and the technology Nasdaq Composite lost 0.9% on Thursday.

The broad stock market traded within a short-term consolidation recently, as investors took profits off the table following the early June rally. Then the S&P 500 index retraced most of its early June advance. But it has bounced off support level of around 2,750 on Tuesday. And here we are again at this level of support following yesterday's decline. Is this a new short-term downtrend?

There are still two possible medium-term scenarios - bearish that will lead us below the 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. There is also a chance that the market will just go sideways for some time, and that would be positive for bulls in the long run (some kind of an extended flat correction). The S&P 500 index trades along its two-month-long upward trend line:

New Downtrend or Just More Sideways Price Action?

Expectations before the opening of today's trading session are slightly positive, because the index futures contracts trade 0.1-0.2% above their Thursday's closing prices. Investors will wait the Flash Manufacturing PMI, Flash Services PMI numbers releases at 9:45 a.m. The broad stock market may extend its short-term consolidation today. However, if the S&P 500 index breaks below the support level of around 2,740-2,750, it could continue lower. The next level of support is at around 2,700-2,720.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its yesterday's decline. The nearest important level of support is at around 2,745-2,750, marked by the local low. On the other hand, the resistance level is at around 2,765-2,770, among others. The futures contract trades slightly above its Tuesday's local low after breaking above yesterday's intraday downward trend line, as we can see on the 15-minute chart:

Concluding, the broad stock market will likely open slightly higher or virtually flat today. If the S&P 500 index breaks below the above-mentioned level of support, we could see more selling pressure.

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