Briefly:

Intraday trade: The S&P 500 index gained 0.3% after opening 0.2% higher on Monday. The broad stock market will likely open slightly higher again today. However, we may see more short-term uncertainty, as the market gets closer to the resistance level. We prefer to be out of the market, avoiding low risk/reward ratio trades.

Trading position (short-term; our opinion): short positions in the S&P 500 Index (opened at the level of 2,810 on July the 30th) with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Our intraday outlook is neutral. Our short-term outlook is bearish, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes gained 0.1-0.4% on Monday, slightly extending their short-term uptrend, as investors' sentiment remained bullish. The S&P 500 index closed just below its early August local highs and it currently trades 0.5% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.4% and the technology Nasdaq Composite gained 0.1% yesterday.

The nearest important level of support of the S&P 500 index is now at around 2,830-2,835, marked by the short-term local lows. The next support level is at 2,825-2,830, marked by the last Thursday's daily gap up of 2,827.95-2,831.44. The support level is also at 2,800-2,805, marked by the recent local lows. On the other hand, the level of resistance is at 2,860-2,865, marked by the early August local highs. The next resistance level is at 2,870-2,875, marked by the record high. Potential resistance level is also at 2,900.

The broad stock market got close to its January's record high recently, as investors' sentiment improved following quarterly corporate earnings, economic data releases. The S&P 500 index is just 0.5% below the mentioned January's record high. Will it break higher? There are still two possible medium-term scenarios - bearish that will lead us towards the February low again, and the bullish one - breakout higher towards 3,000 mark. The latter one got very real recently:

Positive Expectations Again

Expectations before the opening of today's trading session are slightly positive, because the index futures contracts trade 0.1-0.2% higher vs. their Monday's closing prices. The European stock market indexes have been mixed so far. There will be no new important economic data announcements today. The broad stock market will probably open slightly higher today. We may see an attempt at breaking above the early August local highs. However, if stocks fail at the resistance level of around 2,865, we could see a profit-taking action.

The S&P 500 futures contract trades within an intraday uptrend, as it extends its yesterday's advance. The nearest important level of resistance is now at around 2,865, marked by the recent local highs. On the other hand, support level is at 2,850, and the next level of support is at 2,835-2,840, marked by some recent local lows. The futures contract trades above its recent local high, as we can see on the 15-minute chart:

Nasdaq Still at 7,400

The technology Nasdaq 100 futures contract trades below its yesterday's local high, as it remains relatively weaker than the broad stock market. The nearest important level of resistance is at around 7,420-7,450, marked by the recent local highs. The next resistance level is at 7,470-7,500, among others. On the other hand, level of support is at 7,350-7,370. The Nasdaq futures contract extends its short-term fluctuations, as the 15-minute chart shows:

Big Cap Tech Stocks' Topping Pattern?

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached yet another new record high at the level of $219.18 yesterday before rerversing and closing slightly lower. Its current market capitalization is at a spectacular $1.05 trillion. But will it last? There have been no confirmed negative signals so far. However, we may see a downward correction at some point. The nearest important level of support is now at $205-210, marked by the recent consolidation:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It has reached the new record high on Monday a week ago at the level of $1,925.00. Since then it traded within a short-term consolidation. The nearest important level of resistance remains at around $1,925. On the other hand, support level is at 1,850. The stock continues to trade above its medium-term upward trend line, as we can see on the daily chart:

Dow Jones Continued Higher

The Dow Jones Industrial Average reached a new local high yesterday, as it extended its last week's rally following breaking above its early August local high. Is this a new uptrend? We can see some short-term overbought conditions, so the market may fluctuate along its local high for a while. The nearest important level of resistance is at around 25,800, marked by the late February local high. On the other hand, support level remains at 25,400, among others:

The S&P 500 index got closer to its early August local highs of around 2,860-2,865 yesterday. Investors' sentiment remains pretty bullish following last Wednesday's bounce off support level of 2,800. Will stocks break higher and continue towards their late January record high? It becomes more and more likely.

Concluding, the broad stock market will likely open slightly higher today. Then we may see some short-term consolidation along the resistance level of around 2,860-2,865. For now, it looks like a month-long consolidation following the July rally. There are still some resistance levels ahead.

Intraday trade:

No intraday position is justified from the risk/reward perspective today.

Trading position (short-term; our opinion): short positions in the S&P 500 Index (opened at the level of 2,810 on July the 30th) with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
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