Briefly:
Intraday trade: The S&P 500 gained 0.1% on Thursday, after opening virtually flat. The market will probably open slightly higher today. We may see some more short-term fluctuations along the level of 2,600-2,650.
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 +0.7% on Thursday, as investors continued to hesitate following their month-long advance. The S&P 500 index extended its rebound off the December 26th medium-term low of 2,346.58 recently. The index traded 20.2% below the September 21st record high of 2,940.91 on that day. Then the market rallied and retraced more than 50% of the move down (at 2,643.74). It broke slightly above the 2,600 mark and it got closer to 2,700 a week ago. The Dow Jones Industrial Average lost 0.1% and the Nasdaq Composite gained 0.7% yesterday.
The nearest important resistance level of the S&P 500 index remains at 2,675-2,685, marked by the early December local highs. The resistance level is also at 2,700-2,710. On the other hand, the support level is at around 2,600-2,610. The support level is also at 2,570-2,585, marked by some recent local lows.
The broad stock market broke below its two-month-long trading range in the mid-December, as the S&P 500 index fell below the level of 2,600. Then the market accelerated lower and it broke below the 2,400 mark. The downward correction reached 20.2% from the September all-time high, surpassing the January-February correction of around 12%. Since then, the market has retraced more than 50% of the whole decline off the September high. The index trades close to a possible resistance level of its previously broken upward trend line, as we can see on the daily chart:
S&P 500 Back at 2,650
The index futures contracts trade 0.6-0.9% above their Thursday's closing prices. However, the market sold off yesterday's after-hours following worse-than-expected quarterly earnings release from Intel. So expectations before the opening of today's trading session are slightly positive. The European stock market indexes have gained 0.1-1.4% so far. There will be no new important economic data announcements today. The broad stock market will likely continue to fluctuate following the recent advance and its Tuesday's downward correction. There have been no confirmed negative signals so far. But we saw some clear short-term technical overbought conditions recently.
The S&P 500 futures contract trades within an intraday uptrend, as it gets closer to the recent local highs. The nearest important resistance level is at around 2,650-2,670. On the other hand, the support level is at 2,615-2,620, marked by the local lows. The futures contract trades above its recent downward trend line, as the 15-minute chart shows:
Nasdaq Also Higher
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend after yesterday's after-hours decline. The market gained over 1,000 points from December the 26th local low of around 5,820 recently. A week ago on Friday it broke above the 6,800 mark before quickly reversing lower. The nearest important resistance level is now at 6,800-6,830. The support level is at 6,650, marked by the recent local lows. The Nasdaq futures contract trades close to the level of 6,750 this morning, as we can see on the 15-minute chart:
Big Cap Tech Stocks - More Uncertainty Ahead of Earnings Releases
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock sold off in early January, as it reached the new medium-term low of $142. We saw clear short-term oversold conditions and then the stock retraced some of its recent decline. It broke above the month-long downward trend line, but it still trades below the resistance level of $155-160:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The stock accelerated its downtrend in the late December and it reached a new medium-term low of $1,307. Since then it has been consequently advancing. The market broke above one of its three-month-long downward trend lines. There is a close resistance level at around $1,700-1,750, and the stock retraced its recent run-up recently:
Dow Jones - Relatively Small Trading Range This Week
The Dow Jones Industrial Average broke above the level of 24,000 last week, and it continued higher towards the 25,000 mark on Friday. The market is back above its October-December local lows. So will it continue higher and reach the record high again? For now, it still looks like an upward correction. However, there have been no confirmed negative signals so far. The resistance level remains at the mentioned 25,000 level:
The S&P 500 index extended its short-term uptrend recently, as it broke above the mentioned 50% retracement of the whole downtrend from the record high. Is this a new medium-term uptrend? We can see a short-term correction. However, the medium-term picture is quite bullish at this moment.
Concluding, the S&P 500 index will likely open slightly higher today and then we may see some more short-term fluctuations. 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
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