Briefly:

Intraday trade: The S&P 500 index was virtually flat on Thursday, after opening 0.3% higher. The market will probably lower today. We may see some more fluctuations along the medium-term support levels.

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 were mixed between -0.4% and +0.3% on Thursday, as investors hesitated following the recent volatility and the Monday's rebound off the new medium-term low of 2,583.23. The S&P 500 index traded 12.2% below September the 21st record high of 2,940.91. It is currently 9.8% below that all-time high. The Dow Jones Industrial Average gained 0.3% and the Nasdaq Composite lost 0.4% on Thursday.

The nearest important level of resistance of the S&P 500 index remains at around 2,675-2,685, marked by some recent fluctuations. The resistance level is also at 2,695-2,700, marked by last Thursday's daily gap down of 2,696.15-2,697.18. On the other hand, the support level is now at 2,630-2,650. The level of support is also at  2,580-2,600, marked by the medium-term local lows.

The broad stock market reversed its recent upward course following the S&P 500 index' reversal off the resistance level at 2,800. On Thursday a week ago the market broke below 2,700 mark, as it retraced more of the rally. On Monday it fell the lowest since the early April, before bouncing off and getting above 2,600 mark at the end of the day. The index continues to trade above its previous medium-term lows, as we can see on the daily chart:

Negative Expectations, New Downtrend or Just Consolidation?

The index futures contracts trade 0.9-1.0% below their yesterday's closing prices. So expectations before the opening of today's trading session are negative. The main European stock market indexes have lost 0.7-1.0% so far. Investors will now wait for series of economic data announcements: Retail Sales at 8:30 a.m., Industrial Production, Capacity Utilization Rate at 9:15 a.m. Flash Manufacturing PMI at 9:45 a.m., Business Inventories at 10:00 a.m. The broad stock market will likely extend its short-term fluctuations after the Monday's rebound. It still looks like a volatile medium-term consolidation following the October decline despite Monday's sell-off below 2,600 mark.

The S&P 500 futures contract trades within an intraday downtrend, as it extends its yesterday's intraday decline. The nearest important resistance level is now at around 2,640-2,650, marked by the previous level of support. On the other hand, the support level is at 2,580-2,600. The futures contract is below its two-day-long downward trend line, as the 15-minute chart shows:

Nasdaq Also Lower

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. The market fell closer to the late November lows on Monday. It was relatively stronger than the broad stock market, as it didn't reach a new medium-term low. Then the tech stocks' gauge gained more than 300 points. And now it is trading close to 6,700 mark again. The nearest important support level is at 6,650-6,700, among others. The Nasdaq futures contract retraces some of its recent advance, as we can see on the 15-minute chart:

Apple, Amazon - Still Going Sideways

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock extended its sell-off on Monday, following Friday's breakdown below the price of $170. It reached the new medium-term low of $163.33. Then the market got back to $170. So was it a panic bottom before an upward reversal? There have been no confirmed positive signals so far. But we still can see some technical oversold conditions:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. The resistance level remains at $1,750-1,800, marked by some previous local highs. The stock continues to trade slightly below its two-month-long downward trend line, as we can see on the daily chart:

Dow Jones - Narrow Trading Range

The Dow Jones Industrial Average got closer to 26,000 mark recently, as it accelerated its short-term uptrend, but then it quickly reversed lower. We saw more downward action on Thursday a week ago, as the index fell to around 24,250, before bouncing off to 25,000 again. On Friday, the blue-chip stocks' gauge fell closer to the support level again. And on Monday, it fell below 24,000 before bouncing off and closing virtually flat. It looks like a short-term upward reversal, but there have been no confirmed positive signals so far:

The S&P 500 index fell the lowest since the early April on Monday following last week's failed rally to 2,800 mark. It reversed its intraday downward course after bouncing off the support level of around 2,580-2,600. Will it continue higher? Or was it just an upward correction before another leg lower and a real breakdown below the medium-term local lows? There have been no confirmed positive signals so far. The broad stock market continues to trade within its two-month-long consolidation.

Concluding, the S&P 500 index will likely open lower today. Then we may see some more short-term fluctuations along the medium-term support level. Investors will wait for series of economic data announcements this morning.

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

Thank you.

Paul Rejczak
Stock Trading Strategist
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