Briefly:

Intraday trade: The S&P 500 index gained 0.2% on Monday, after opening 0.4% higher. The broad stock market will probably open slightly lower today. We may see more short-term fluctuations along the support level of the late January high. 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 U.S. stock market indexes were mixed between -0.2% and +0.3% on Monday, as they extended their short-term fluctuations following the recent record breaking run-up. The S&P 500 index has reached the record high of 2,916.50 on August the 29th. It currently trades 1.3% below that high. The Dow Jones Industrial Average lost 0.2% and the technology Nasdaq Composite gained 0.3% yesterday.

The nearest important level of support of the S&P 500 index remains at around 2,860-2,865, marked by the recent fluctuations. The support level is also at 2,830-2,835. On the other hand, the nearest important level of resistance is at 2,885, marked by the previous support level and yesterday's local high, among others. The next resistance level is at 2,900. The resistance level is also at 2,910-2,915, marked by the mentioned late August 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 downward correction. The market retraced its late August advance, and it got back down to the support level of its late January high. Will it continue lower or reverse higher towards the all-time high? For now, it looks like a downward correction within an uptrend. The index continues to trade above its medium-term upward trend line, as we can see on the daily chart:

More Short-term Fluctuations

The expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.2-0.4% below their yesterday's closing prices. The European stock market indexes have lost 0.2-0.6% so far. Investors will now wait for some economic data announcements today: Wholesale Inventories, JOLTS Jobs Opening number at 10:00 a.m. The broad stock market will probably extend its short-term fluctuations following the recent run-up. For now, it looks like a correction within an uptrend. There have been no confirmed negative medium-term signals so far.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces its recent advance. The market extends its short-term consolidation. The nearest important level of resistance is at around 2,880-2,885, marked by the local highs. The resistance level is also at 2,890-2,900. On the other hand, the support level is at 2,860-2,865, marked by the recent local low. The futures contract is close to its recent local lows, as the 15-minute chart shows:

Nasdaq Also Lower

The technology Nasdaq 100 futures contract follows a similar path, as it gets back down within a short-term consolidation. It bounced off the resistance level of around 7,480-7,500. The tech stocks' gauge is relatively weaker than the broad stock market following almost 4% downward correction off its August 30th record high of around 7,700. The next level of resistance is at 7,550, marked by the recent local high. On the other hand, the support level is at 7,400-7,420. The Nasdaq futures contract trades within a short-term consolidation, as we can see on the 15-minute chart:

Apple, Amazon Extend Their Downward Correction

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 a week ago before reversing lower. Then it broke below its month-long upward trend line. The nearest important level of support is at $215-220, marked by the recent consolidation. It looks like a short-term downward reversal:

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. It looks like a topping pattern:

Blue-chip Stocks Still Going Sideways

The Dow Jones Industrial Average fluctuates following its August advance. The blue-chip stocks' gauge continues to trade along the level of 26,000. But it is still way below the late January record high of 26,616.71. 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 in the late August. Since then the broad stock market retraced some of its rally and it got back below 2,900 mark. Was it a meaningful downward reversal or just a correction before another leg up? There have been no confirmed negative signals so far. However, we can see some short-term overbought conditions along with negative technical divergences.

Concluding, the S&P 500 index will likely open lower today. Then it may extend its short-term fluctuations following the late August record-breaking rally. For now, it looks like a downward correction within an uptrend from the August local low of around 2,800. 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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