Briefly:
Intraday trade: The S&P 500 index was virtually flat on Thursday, after opening 0.1% higher. The broad stock market will likely open virtually flat again today. We may see an attempt at breaking above the last year's record high.
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 -0.5% and +0.2% on Thursday, extending their short-term consolidation following the recent rally. The S&P 500 index retraced almost all of its medium-term downward correction of 20.2% recently. The broad stock market's gauge is now just 0.5% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average lost 0.5% and the Nasdaq Composite gained 0.2% on Thursday.
The nearest important resistance level of the S&P 500 index remains at around 2,940, marked by the mentioned record high. On the other hand, the support level is at 2,920, marked by the recent resistance level. The support level is also at 2,900.
The broad stock market retraced all of its December sell-off and it broke above the medium-term resistance level of around 2,900 recently. So is it still just a correction or a new medium-term uptrend? 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 got very close to its last October all-time high, as we can see on the daily chart:
Uncertainty Following Recent Rally
Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade between -0.2% and +0.1% vs. their yesterday's closing prices. The European stock market indexes have lost 0.1-0.3% so far. Investors will wait for some important economic data announcements today: Advance GDP number at 8:30 a.m., Revised UoM Consumer Sentiment at 10:00 a.m. Stocks will likely extend their short-term consolidation along the last year's record high. There have been no confirmed negative signals so far. However, we can see some short-term technical overbought conditions.
The S&P 500 futures contract trades within an intraday consolidation, following yesterday's after-hours decline. The nearest important resistance level is at around 2,935-2,940. On the other hand, the support level is at 2,900-2,915, among others. The futures contract remains relatively close to the recent high, as the 15-minute chart shows (the chart is from 1:00 a.m.):
Nasdaq Below the Trend Line
The technology Nasdaq 100 futures contract reached the new record high recently, as investors reacted to the quarterly corporate earnings releases from Microsoft and Facebook. But yesterday after the session's close it retraced some of the short-term rally. The resistance level is at 7,850-7,900. On the other hand, the support level is at 7,750-7,800. The Nasdaq futures contract broke below the short-term downward trend line, as we can see on the 15-minute chart (the chart is from 1:00 a.m.):
Microsoft - Blow-Off Topping Pattern?
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock accelerated its uptrend recently and it broke above the $200 level. On Wednesday the market reached another new medium-term high, but then got closer to the medium-term upward trend line:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock accelerated its uptrend yesterday, as it reached the new record high of $131.37. Investors reacted to the Wednesday's better-than-expected quarterly earnings release. For now, it looks like blow-off topping pattern. We can see some clear technical overbought conditions:
Dow Jones Relatively Weaker
The Dow Jones Industrial Average was relatively weaker than the broad stock market yesterday, as it lost 0.5%. It broke above its February local high recently and it extended the 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. On Tuesday the blue-chip stocks' gauge reached another new medium-term high. There have been no confirmed negative signals so far. However, we can see some negative technical divergences:
The S&P 500 index broke above its short-term consolidation on Tuesday and then it got very close to the record high of 2,940.91. The broad stock market may reach new record highs, as investors' sentiment remains very bullish ahead of quarterly corporate earnings releases. However, we can see short-term technical overbought conditions that may lead to a downward correction at some point.
Concluding, the S&P 500 index will likely open virtually flat today. We may see an attempt at breaking above the last year's record high. Investors will await the crucial 1st quarter GDP data release this morning.
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
