Briefly:

Intraday trade: Our Monday's intraday outlook was neutral. The S&P 500 index gained 0.7% after opening 0.5% higher. The intraday trading range was relatively narrow. The stock market will probably open slightly higher today and test its resistance level again. 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 between 0.5% and 1.2% on Monday, retracing their last week's move down, as investors reacted to economic news. The S&P 500 index got closer to its recent local high around 2,740, and it currently trades 5.1% below January 26 record high of 2,872.87. The Dow Jones Industrial Average gained 1.2%, as it was relatively stronger than the broad stock market. The technology Nasdaq Composite gained 0.5% on Monday.

The nearest important level of resistance of the S&P 500 index is at around 2,740-2,750, marked by last week's Monday's local high and mid-March local high. On the other hand, support level is at around 2,720-2,725, marked by yesterday's daily gap up of 2,719.50-2,725.70. The support level is also at 2,700-2,710, marked by previous daily gap up of 2,701.27-2,704.54 and some recent daily lows.

The broad stock market extended its short-term uptrend in the beginning of the month, as the S&P 500 index broke above the level of 2,700 again. Stocks lost some ground on Tuesday a week ago, but it didn't look like new downtrend. Since then, the market traded within consolidation. So, will the run-up continue towards 2,800? There are still two possible medium-term scenarios - bearish that will lead us below 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):

Close to Local High

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.2-0.4% higher vs. their yesterday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for the Richmond Manufacturing Index release at 10:00 a.m. The broad stock market will probably extend its short-term fluctuations today. It still looks like a flat correction within an uptrend. However, if the index doesn't break above its recent local high pretty soon, we could see some more profit-taking action.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces yesterday's intraday move down. The nearest important level of resistance is at around 2,740, marked by local highs. Potential resistance level is also at 2,750-2,760, marked by some previous highs. On the other hand, support level is at 2,720-2,725, marked by yesterday's local lows. The next level of support remains at 2,700-2,710, among others. The futures contract trades along its two-day-long upward 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 retraces yesterday's intraday decline. It continues to fluctuate after bouncing off 7,000 mark more than a week ago. Is this a topping pattern ahead of downward reversal or just consolidation before another leg up? It's hard to say. However, tech stocks remain relatively close to their all-time highs. The nearest important support level of the Nasdaq 100 futures contract is at around 6,900, and the next support level is at 6,850-6,870, marked by local lows. On the other hand, resistance level remains at 6,940-6,960, among others. The Nasdaq futures contract extends its short-term consolidation, as we can see on the 15-minute chart:

Apple, Amazon - Going Sideways, but Close to Record Highs

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached new record high more than a week ago on Friday, as it extended its short-term uptrend. The price bounced off resistance level of around $190-200 and since then it trades within a consolidation. Is this a topping pattern? There have been no confirmed negative signals so far:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. The price reached new record high in late April, as investors reacted to better-than-expected quarterly earnings release. Then, on the same trading day it sold off below $1,600. Was this a downward reversal or just correction following breakout higher? The recent price action looked pretty bullish, as price got back closer to all-time high level. However, the stock retraced some of its recent advance on last week's Tuesday. We may see some more short-term uncertainty following late April rally:

Dow Jones - Breakout?

The Dow Jones Industrial Average broke above its medium-term downward trend line recently. Then it continued higher above a few-week-long downward trend line. The blue-chip index bounced off resistance level of 25,000 a week ago, and then it retraced some of its recent advance. Yesterday's trading session was bullish as Dow Jones broke above its recent local high and closed at 25,000 mark. There have been no confirmed negative signals so far:

The broad stock market broke above its short-term consolidation yesterday and it got closer to last week's Monday's local high. The S&P 500 index continues to trade above 2,700 mark, following recent breakout above that resistance level. Is this a new uptrend? Or some topping pattern before downward reversal? There have been no confirmed negative signals so far. 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.

Concluding, the S&P 500 index will likely open slightly higher today following yesterday's move up, but we may see some more short-term uncertainty. There are relatively important resistance levels ahead. It still looks like a flat correction within an uptrend.

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