Briefly:
Intraday trade: The S&P 500 lost 0.1% on Tuesday, after opening virtually flat. The market will probably open virtually flat again today. We may see more short-term fluctuations along the medium-term resistance level.
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 -0.1% and 0.0% on Tuesday, as investors hesitated following the recent advances. The S&P 500 index retraced more of its October-December downward correction of 20.2% on Monday, before reversing its intraday advance and getting back below the 2,800 level. The market continued to fluctuate close to the previous medium-term local highs. The Dow Jones Industrial Average lost 0.1% and the Nasdaq Composite was unchanged on Tuesday.
The nearest important resistance level of the S&P 500 index remains at 2,800-2,820, marked by the medium-term local highs. On the other hand, the support level is at around 2,765-2,780, marked by the recent local lows. The support level is also at the previous daily gap up of 2,757.90-2,760.24.
The broad stock market retraced all of its December sell-off and it got close to the medium-term resistance level of around 2,800, marked by the October-November local highs. 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 highs. But will the index break above the mentioned previous local highs? There have been no confirmed negative signals so far:
Flat Expectations, Uncertainty Following Monday's Decline
Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade 0.1% below their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements today: Trade Balance at 8:30 a.m., Crude Oil Inventories at 10:30 a.m., the Beige Book release at 2:00 p.m. The broad stock market will likely continue to fluctuate within a short-term consolidation. We may see some more uncertainty as the market remains close to the mentioned medium-term local highs.
The S&P 500 futures contract trades within an intraday consolidation, as it remains slightly below the 2,800 mark. The nearest important level of resistance is at 2,800-2,820. On the other hand, the support level is at 2,770-2,680, among others. The futures contact continues to go sideways this morning, as the 15-minute chart shows:
Nasdaq Also Going Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it trades within a two-day-long consolidation after bouncing off the 7,050-7,100 support level. The market gained almost 1,400 points from December the 26th local low of around 5,820. The nearest important resistance level is at around 7,200-7,250, marked by some previous local highs. The Nasdaq futures contract continues to trade along the recent local highs, as we can see on the 15-minute chart:
Apple, Amazon - Short-Term Pause or Topping Pattern?
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke above $175 on Monday, as it extended its recent advance. The market retraced some more of the November-December sell-off. But will it come back above $200? For now, it still looks like a medium-term upward correction:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The market broke above its medium-term downward trend line on Monday. But will it continue higher? There is a relatively important resistance level of around $1,740-1,750, marked by the previous local high:
Dow Jones Remains Below 26,000
The Dow Jones Industrial Average extended its short-term uptrend a week ago, but then it reversed lower. The blue-chip stocks' gauge fell below the 26,000 mark on Monday. For now, it looks like a downward correction. However, if the market breaks below the previous resistance level of 25,500, we could see more selling pressure:
The S&P 500 index slightly extended its recent run-up on Monday, before reversing lower and closing below the 2,800 level. It remains at the medium term resistance level. So is this a new medium-term uptrend or still just upward correction before another medium-term leg lower? The market trades above the 61.8% Fibonacci retracement of the whole medium-term decline. There have been no confirmed negative signals so far.
Concluding, the S&P 500 index will likely open virtually flat today. We may see some more short-term fluctuations along the mentioned medium-term resistance level. For now, it looks like a relatively flat correction within an uptrend.
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
