Briefly:

Intraday trade: The S&P 500 lost 0.1% on Thursday, after opening virtually flat. The market will probably open higher today. But we may see some short-term uncertainty as stocks trade close to their previous medium-term local highs.

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 -0.2% and 0.0%, as investors hesitated following the recent advance. The S&P 500 index retraced more of its October-December downward correction of 20.2% on Wednesday. The market is close to the previous medium-term local highs following Wednesday's intraday rally to the new medium-term high of 2,821.24. The broad stock market's gauge is now just 4.5% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average was unchanged and the Nasdaq Composite lost 0.2% on Thursday.

The nearest important resistance level of the S&P 500 index remains at around 2,815-2,820, marked by the medium-term local highs. On the other hand, the support level is at 2,795-2,800, marked by the Wednesday's daily gap up of 2,798.32-2,799.78. The support level is also at 2,785, marked by the Tuesday's daily gap up of 2,784.00-2,786.73.

The broad stock market retraced all of its December sell-off and it got close to the medium-term resistance level of around 2,800-2,820, marked by the October-November local highs recently. 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. The index is now back at the previously broken two-month-long upward trend line:

Positive Expectations, Rally to Continue?

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 0.7-1.0% so far. Investors will wait for series of economic data announcements today: Empire State Manufacturing Index at 8:30 a.m., Industrial Production, Capacity Utilization Rate at 9:15 a.m., Michigan Sentiment number, JOLTS Job Openings at 10:00 a.m. The broad stock market will likely extend its short-term consolidation. We may see some more fluctuations along the previous medium-term local highs. There have been no confirmed negative signals so far.

The S&P 500 futures contract trades within an intraday uptrend, as it gets close to the recent local highs again. The nearest important level of resistance is now at around 2,825. On the other hand, the support level is at 2,810, marked by the short-term local low. The futures contract remains above the 2,810 level, as we can see on the 15-minute chart:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market rallied around 1,500 points from December the 26th local low of around 5,820. The nearest important resistance level is now at 7,320. On the other hand, the support level is at 7,200-7,250, marked by the recent resistance level. The Nasdaq futures contract continues to trade along the short-term upward trend line, as the 15-minute chart shows:

Big Cap Tech Stocks - More Uncertainty

Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The market broke above its recent local highs on Monday and then it broke slightly above the $180 level. The next resistance level is at $190-200. 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 retraced its recent decline this week. However, it continues to trade along the medium-term downward trend line. There is a relatively important resistance level of around $1,700-1,750, marked by the previous local highs:

Dow Jones Relatively Weaker

The Dow Jones Industrial Average retraced some of its recent decline this week, following bouncing off the support level of around 25,000-25,500. For now, it looks like an upward correction. However, if the blue-chip stocks' gauge breaks above the 26,000 level, we could see more buying pressure:

The S&P 500 index extended its recent run-up on Wednesday, as i got the highest since October the 10th before slightly retracing the intraday rally. The market came back to the previously broken two-month-long upward trend line. So will it act as a resistance level? We could see some short-term uncertainty, as stocks reach their previous medium-term highs.

Concluding, the S&P 500 index will likely open higher today. Then we may see some short-term fluctuations following the recent rally. There have been no confirmed negative signals so far.

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