Briefly:

Intraday trade: The S&P 500 index lost 0.6% on Monday, after opening virtually flat. The broad stock market will probably open higher today. We may see some more short-term fluctuations following the late August rally. We prefer to be out of the market, avoiding low risk/reward ratio trades.

Trading position (short-term; our opinion): no short-term positions are justified from the risk/reward perspective.

Our intraday outlook is neutral. 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 lost between 0.4% and 1.4% on Monday, retracing some of their recent advance, as investors took short-term profits off the table. The S&P 500 index has reached the record high of 2,916.50 on August the 29th. It currently trades just 0.9% below that high. The Dow Jones Industrial Average lost 0.4% and the technology Nasdaq Composite lost 1.4% yesterday.

The nearest important level of support of the S&P 500 index is now at around 2,880, marked by the last Wednesday's daily low. The support level is also at around 2,860-2,865, marked by the recent fluctuations. On the other hand, the nearest important level of resistance is at 2,895-2,900, marked by the recent level of support. The resistance level is also at 2,910-2,915, marked by the mentioned record high.

The broad stock market reached the new record high in the late August, as it extended its short-term uptrend above the level of 2,900. Since then it trades within a consolidation. Yesterday, it fell below 2,900 mark again. Will it advance towards new all-time highs? Or is this some medium-term topping pattern? The index trades above its three-month-long upward trend line, as we can see on the daily chart:

Downward Reversal or Just Consolidation?

The index futures contracts trade 0.2-0.3% higher vs. their yesterday's closing prices. So expectations before the opening of today's trading session are slightly positive. The main European stock market indexes have gained 0.2% so far. There will be no new important economic data announcements today. The broad stock market will probably continue to fluctuate within its almost month-long consolidation following the late August record-breaking rally. The index is below the level of 2,900 again, but it continues to fluctuate relatively close to the late August record high. There have been no confirmed negative medium-term signals so far.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces its yesterday's decline. The market got back to 2,900 mark. The nearest important level of resistance is at around 2,905-2,910. On the other hand, support level remains at 2,880-2,885, marked by the short-term local low. The futures contract trades slightly above its over two-day-long downward trend line, as the 15-minute chart shows:

Nasdaq Below 7,500 Again

The technology Nasdaq 100 futures contract follows a similar path, as it retraces its yesterday's decline. However, the tech stocks' gauge remains relatively weaker than the broad stock market following almost 4% downward correction off the August 30th record high of around 7,700. The level of resistance is now at 7,500 again. The next resistance level is at 7,550-7,600, among others. On the other hand, support level is at 7,400-7,420, marked by the short-term local low. The Nasdaq futures contract bounced off its last week's local lows, as we can see on the 15-minute chart:

Big Cap Tech Stocks Reversing Lower

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached the new record high at the level of $229.67 on September the 5th, before reversing lower. Then it broke below its month-long upward trend line. The resistance level remains at $225-230. On the other hand, support level is at $215. If the price breaks lower, we could see more selling pressure:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It has reached the new record high at the price of $2,050.50 recently. Since then it was retracing some of this record-breaking rally. The stock broke below the month-long upward trend line. We still can see negative technical divergences. Last Tuesday's intraday reversal didn't lead the market to the record high. The resistance level remains at $2,000:

Dow Jones Remains Relatively Stronger

The Dow Jones Industrial Average broke above its late August local high on Thursday, as it got back above 26,000 mark. But will it continue upwards? The nearest important level of resistance is at 26,340-26,440, marked by the late January daily gap down. The index remains above its two-month long upward trend line, as the daily chart shows:

The S&P 500 index reached the new record high at the level of 2,916.50 last month. Since then the broad stock market's gauge is fluctuating along the level of 2,900. There have been no confirmed negative signals so far. However, we still can see some short-term technical overbought conditions along with negative technical divergences.

Concluding, the S&P 500 index will likely open higher today. Stocks may retrace some of their yesterday's decline. We may see more short-term consolidation. There have been no confirmed negative medium-term signals so far.

Intraday trade:

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

Trading position (short-term; our opinion): no short-term positions are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
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