Briefly:
Intraday trade: The S&P 500 was unchanged on Tuesday, after opening virtually flat. The market will probably open higher today following better-than-expected global economic data releases. The index will extend its short-term uptrend. However, we may see a profit-taking action at some point.
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 -0.3% and +0.3% on Tuesday, as investors hesitated following Friday’s-Monday’s rally. The S&P 500 index retraced more of its October-December downward correction of 20.2% yesterday. The broad stock market's gauge is now just 2.5% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average lost 0.3% and the Nasdaq Composite gained 0.3% on Tuesday.
The nearest important resistance level of the S&P 500 index remains at 2,890-2,900, marked by some early October local highs. The next resistance level is at 2,920-2,940, marked by the mentioned record high, among others. On the other hand, the support level is now at 2,835-2,845, marked by the Monday’s daily gap up of 2,836.03-2,848.63. The support level is also at around 2,820, marked by last Friday’s daily low.
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 high. There have been no confirmed negative medium-term signals so far. The index gets closer to its last October all-time high, as we can see on the daily chart:
Positive Expectations, but Will Rally Continue?
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.4-0.6% above their yesterday’s closing prices. The European stock market indexes have gained 0.1-1.0% so far. Investors will wait for some important economic data releases this morning: ADP Non-Farm Employment Change at 8:15 a.m., ISM Non-Manufacturing PMI at 10:00 a.m., Crude Oil Inventories at 10:30 a.m. The broad stock market will likely extend its advance today. However, we may see some profit-taking action at some point.
The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following an overnight rally. The nearest important resistance level is at around 2,890-2,900. On the other hand, the support level is at 2,870-2,875, marked by the recent resistance level. The futures contract trades along the broken short-term upward trend line this morning, 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 consolidation. The market broke above its previous local high overnight. The nearest important resistance level is at 7,600. On the other hand, the support level is now at 7,500. The Nasdaq futures contract remains close to its new local high, as we can see on the 15-minute chart:
Big Cap Tech Stocks Still Lagging The Broad Stock Market
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 more than a week ago and then it continued above the $180 level. The stock accelerated the uptrend and it traded within a resistance level of $190-200. It is back at the resistance level again:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The price broke above the $1,800 level recently. But then it fluctuated. On Monday, the price got back above $1,800. If it breaks above the recent local high, we could see more buying pressure:
Dow Jones – New Uptrend or Still Just Consolidation?
The Dow Jones Industrial Average traded at its February local on Monday, as it broke above the 26,000 mark. The blue-chips stocks’ gauge is close to resuming its medium-term uptrend. The next resistance level is at around 26,800-27,000, marked by the last year’s topping pattern and the record high of 26,951.8:
The S&P 500 index extended its short-term uptrend yesterday, as it got the highest since the early October. We wrote that the recent consolidation looked like a relatively flat correction within a three-month-long uptrend. And we were right. But will the market reach its last year’s record high? There may be some uncertainty, as the S&P 500 gets closer to the 2,900 resistance level.
Concluding, the S&P 500 index will likely open higher today. Then we may see some profit-taking action 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
