Briefly:
Intraday trade: The S&P 500 gained 0.4% on Monday, after opening virtually flat. The market will probably open higher today. We may see some short-term uncertainty as investors await Wednesday's Fed's Rate Decision announcement.
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 gained 0.3-0.4% on Monday slightly extending their short-term uptrend, as investors' sentiment remained bullish ahead of tomorrow's Fed's Rate Decision release. The S&P 500 index retraced more of its October-December downward correction of 20.2%. The broad stock market's gauge is now just 3.7% below September the 21st record high of 2,940.91. Both the Dow Jones Industrial Average and the Nasdaq Composite gained 0.3% on Monday.
The nearest important resistance level of the S&P 500 index is now at 2,850-2,860, marked by the early October local lows. The resistance level is also at around 2,875, marked by October the 10th daily gap down of 2,874.02-2,874.27. On the other hand, the support level is now at 2,800-2,810, marked by the recent resistance level and the daily gap up of 2,798.32-2,799.78. The support level is also at 2,785, marked by the daily gap up of 2,784.00-2,786.73.
The broad stock market retraced all of its December sell-off and it broke slightly above the medium-term resistance level of around 2,800-2,820, marked by the October-November local highs recently. 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 continue much higher above the mentioned previous local highs? There have been no confirmed negative signals so far. The index is at the previously broken two-month-long upward trend line:
New Highs, Positive Expectations
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.3-0.4% above their Monday's closing prices. The European stock market indexes have gained 0.4-0.8% so far. There will be no new important economic data announcements today. However, investors will wait for the Wednesday's Rate Decision release. The broad stock market will likely extend the uptrend slightly at the opening of today's trading session. Then we may see some short-term profit-taking action.
The S&P 500 futures contract trades within an intraday uptrend, as it slightly extends its recent advance. The nearest important resistance level is now at around 2,850. On the other hand, the support level is at 2,830-2,835, marked by the recent resistance level. The futures contract is at the new local high this morning, as we can see on the 15-minute chart:
Nasdaq Also Higher
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market rallied more than 1,550 points from December the 26th local low of around 5,820. The nearest important resistance level is now at 7,400. On the other hand, the support level is at 7,300-7,350, marked by the recent resistance level. The Nasdaq futures contract continues to trade above its short-term upward trend line, as the 15-minute chart shows:
Big Cap Tech Stocks Extend Their Recent Gains
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The market broke above its recent local highs a week ago and then it continued above the $180 level. The next resistance level is at $190-200. There have been no confirmed negative signals so far:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The market broke above the previous local high yesterday and it got closer to the $1,750 resistance level. The price extends the recent run-up above the broken downward trend line. However, it still trades along the medium-term local highs:
Dow Jones Closer to February High
The Dow Jones Industrial Average retraced some more of its recent decline yesterday, following bouncing off the support level of around 25,000-25,500 a week ago. For now, it looks like an upward correction. However, if the blue-chip stocks' gauge breaks above the 26,000 level, we could see more buying pressure:
The S&P 500 index extended its short-term uptrend yesterday, as it got the highest since October the 10th. The market came back to the previously broken two-month-long upward trend line recently. So will it act as a resistance level? We could see some short-term uncertainty, as stocks reach their previous medium-term highs.
Concluding, the S&P 500 index will likely open higher today. Then we may see some profit-taking action following the recent rally. There have been no confirmed negative signals so far.
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
