Briefly:
Intraday trade: Our Friday's intraday trading outlook was neutral. It proved wrong because the S&P 500 gained 0.6% following higher opening of the trading session. The index broke above its short-term consolidation. We still can see some technical overbought conditions. However, the index continues to trade relatively close to its record highs. Therefore, we prefer to be out of the market again, avoiding low risk/reward ratio trades.
Medium-term trade: In our opinion, no medium-term positions are justified.
Our intraday outlook is neutral today. 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 main U.S. stock market indexes gained 0.4-0.6% on Friday, as investors' sentiment improved following better-than-expected monthly jobs report release. The S&P 500 index got closer to its last Monday's record high of 2,665.19. It currently trades just 0.5% below that level. The Dow Jones Industrial Average gained 0.5%, and the technology Nasdaq Composite was relatively weaker than the broad stock market, as it gained 0.4%. The nearest important level of support of the S&P 500 index is at 2,640, marked by Friday's daily gap up of 2,640.99-2,644.10. The next support level remains at around 2,625, marked by short-term local low. The support level is also at 2,600-2,610, marked previous low. On the other hand, resistance level is at 2,650, marked by previous level of support. The next level of resistance is at around 2,660-2,665, marked by all-time high. Will the S&P 500 index continue its uptrend? Or is this some volatile topping pattern before medium-term downward correction? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:
Will Uptrend Continue?
Expectations before the opening of today's trading session are positive, with index futures currently up 0.2-0.4% vs. their Friday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for the JOLTS Job Openings number release at 10:00 a.m. The market expects that it was at 6.03M in November. The S&P 500 futures contract trades within an intraday consolidation following overnight move up. The market extends its Friday's advance, as it breaks slightly above the level of 2,650. The nearest important level of resistance is at around 2,655-2,665, marked by record high. On the other hand, support level is at 2,645-2,650, marked by recent resistance level. The next support level remains at 2,635-2,640, among others. The futures contract retraces most of its recent move down, as we can see on the 15-minute chart:
Nasdaq Relatively Weaker
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. However, it is relatively weaker than the broad stock market. It remains below Friday's local high. The nearest important level of support is at around 6,300-6,320, marked by recent fluctuations. On the other hand, resistance level is at 6,380-6,400. The Nasdaq 100 futures contract trades below its short-term upward trend line, as the 15-minute chart shows:
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) again. The price reached new record high a month ago on, as it extended its uptrend following better-than-expected quarterly earnings release. Since then it fluctuates along the level of $170. Is this a topping pattern or just consolidation before another leg up? The price broke slightly below support level, marked by the early November daily gap up last week. However, it continues to trade close to that support level:
The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index broke above its recent consolidation and reached new record high above 24,000 mark a week ago. It trades within a week-long consolidation. We still can see negative technical divergences. The most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low:
Concluding, the S&P 500 index gained 0.6% on Friday, following better-than-expected monthly jobs data release. The broad stock market trades just 0.5% below last week's Monday's new record high. Will it continue towards new all-time highs this week? We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far.
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
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