Briefly:

Intraday trade: Our Monday's intraday trading outlook was neutral. It proved partly accurate because the S&P 500 lost 0.1% following higher opening of the trading session (+0.6%). The index retraced an overnight move up and extended its short-term consolidation. We still can see some short-term technical overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market again, avoiding low risk/reward ratio trades.

Medium-term trade: In our opinion, no medium-term positions are justified.

Our intraday outlook is neutral today. 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 -1.1% and +0.2% on Monday, as investors took profits off the table following higher opening of the trading session. The S&P 500 index has reached new record high at the level of 2,665.19, before going down almost 1%. The Dow Jones Industrial Average gained 0.2% after reaching new all-time high of 24,534.04. The technology Nasdaq Composite was relatively weak, as it lost 1.1%. It remained below its November 28 record high of 6,914.19. The nearest important level of support of the S&P 500 index is at around 2,630-2,635, marked by some recent local highs. The next support level remains at 2,600-2,610, marked by Friday's local low. The support level is also at at 2,590, marked by last Tuesday's daily gap up of 2,584.64-2,589.17. On the other hand, resistance level is at around 2,660-2,665, marked by all-time high. Will the S&P 500 index continue its uptrend? Or is this some relatively volatile topping pattern before medium-term downward correction? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:

No Clear Short-Term Direction

Expectations before the opening of today's trading session are mixed, with index futures currently between -0.3% and +0.2% vs. their Monday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Trade Balance at 8:30 a.m., ISM Non-Manufacturing PMI number at 10:00 a.m. The market expects that the ISM Non-Manufacturing PMI was at 59.2 in November. The S&P 500 futures contract trades within an intraday downtrend, as it retraces overnight rebound off support level. The nearest important level of resistance is at around 2,640-2,645, marked by local high, and the next resistance level is at 2,650-2,655, marked by recent fluctuations. On the other hand, support level is at 2,625-2,630, among others. The futures contract fluctuates below its new record high level, as the 15-minute chart shows:

Tech Stocks Still Relatively Weaker

The technology Nasdaq 100 futures contract extends its downtrend, as it currently trades below last week's local lows. The nearest important level of resistance is at around 6,280-6,300, marked by some recent local highs. On the other hand, potential support level is at around 6,200. The Nasdaq 100 futures contract trades at its new short-term low, as we can see on the 15-minute chart:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The price reached new record high on November 8, as it extended its uptrend following better-than-expected quarterly earnings release. Since then it fluctuates below the record high. Is this a topping pattern or just consolidation before another leg up? The price remains close to support level, marked by the early November daily gap up:

The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index broke above its recent consolidation and reached new record highs above 24,000 mark. We still can see negative technical divergences. The most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low:

Concluding, the S&P 500 index lost 0.1% on Monday, after reaching new record high and going down almost 1%. The broad stock market extended its uptrend, but failed to close higher vs. its Friday's closing price. We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far. Is this a topping pattern or just another consolidation within an uptrend?

Currently, we prefer to be out of the market, avoiding low risk/reward ratio medium-term trades. We will let you know when we think it is safe to get back in the market.

To summarize: no medium-term positions are justified from the risk/reward perspective at this moment.

Intraday trade:

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

No medium-term position is justified from the risk/reward perspective at this moment.

Thank you.

Paul Rejczak
Stock Trading Strategist
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