Briefly:
Intraday trade: The S&P 500 gained 0.4% on Thursday, after opening 0.1% higher. The market will probably open higher again today. But then we may see some more short-term uncertainty following late last week's decline.
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 gained 0.2-0.4% on Thursday, extending their short-term fluctuations, as investors continued to hesitate following last Friday’s decline. The S&P 500 index retraced more of its October-December downward correction of 20.2% recently. The broad stock market's gauge traded just around 3% below September the 21st record high of 2,940.91 last week. But then it fell close to the 2,800 mark again. The Dow Jones Industrial Average gained 0.4% and the Nasdaq Composite gained 0.3% on Thursday.
The nearest important resistance level of the S&P 500 index remains at around 2,830-2,845, marked by the recent local highs. The resistance level is also at 2,850-2,860, marked by the early October local lows. On the other hand, the support level is at 2,800-2,810, marked by the recent resistance level and the daily gap up of 2,798.32-2,799.78. The support level is also at 2,785, marked by the daily gap up of 2,784.00-2,786.73.
The broad stock market retraced all of its December sell-off and it broke above 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 continue much higher above the mentioned previous local highs? Last Friday's trading session cast some doubts on bulls' power. However, there have been no confirmed negative medium-term signals so far. The index bounced off the previously broken two-month-long upward trend line:
Positive Expectations Again
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.4-0.5% above their Thursday's closing prices. The European stock market indexes have gained 0.3-0.9% so far. Investors will wait for series of economic data announcements today: Personal Income, Personal Spending, Core PCE Price Index at 8:30 a.m., Chicago PMI at 9:45 a.m., Revised UoM Consumer Sentiment, New Home Sales at 10:00 a.m. The broad stock market will likely extend its short-term consolidation. We may see an attempt at getting back to the recent local highs.
The S&P 500 futures contract trades within an intraday uptrend, as it gets closer to the short-term local highs. The nearest important resistance level is at around 2,835. The resistance level is also at 2,850. On the other hand, the support level is at 2,815-2,820, among others. The futures contract is at the recent local high this morning, 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 more than 1,700 points from December the 26th local low of around 5,820. But then it fell more than 250 points from the last Thursday's overnight local high. The nearest important resistance level remains at 7,400-7,450. On the other hand, the support level is at 7,200-7,250, among others. The Nasdaq futures contract is still below the early week’s local high, as the 15-minute chart shows:
Big Cap Tech Stocks Continue Going Sideways
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 a week ago and then it continued above the $180 level. On Thursday and on Friday the stock accelerated the uptrend and it traded within a resistance level of $190-200. But then it reversed its upward course. For now, it looks like a correction following the recent advances:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The price broke above the previous local high early last week and on Thursday it broke above the $1,800 level. However, last Friday's trading session was bearish as the stock bounced off the resistance level. The nearest important support level is now at $1,700:
Dow Jones – No Clear Direction
The Dow Jones Industrial Average retraced some more of its early March decline last week, but on Friday it reversed lower. The resistance level remains at around 26,000. And the blue-chip stocks gauge continues to trade below the February local high. However, it is still above the important 25,000 mark:
The S&P 500 index extended its short-term uptrend last week, as it got the highest since October the 10th again. But then the market bounced off the previously broken two-month-long upward trend line and it fell almost 2% on Friday. Since then stocks have been going sideways. So will they continue lower? For now, it looks like a relatively flat correction within a three-month-long uptrend.
Concluding, the S&P 500 index will likely open higher today. However, we may see some more short-term uncertainty following last week's Thursday's rally and the Friday's sell-off.
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
