Briefly:

Intraday trade: Our Thursday's intraday trading outlook was neutral. It proved accurate, because the S&P 500 gained 0.2% following slightly higher opening of the trading session (+0.2%). The broad stock market continues to trade along its last week's new record high. We still can see medium-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 main U.S. stock market indexes gained 0.2-0.3% on Thursday, extending their short-term fluctuations, as investors reacted to economic data releases, among others. The S&P 500 index trades just 0.3% below last week's Monday's new all-time high of 2,694.97. The Dow Jones Industrial Average gained 0.3%, and the technology Nasdaq Composite gained 0.2% yesterday. The nearest important level of support of the S&P 500 index remains at around 2,680, marked by last week's Monday's daily gap up of 2,679.63-2,685.92. The next support level is at 2,670, marked by recent consolidation. The level of support is also at 2,640-2,650, marked by the December 8 daily gap up of 2,640.99-2,644.10. On the other hand, the nearest important level of resistance is at 2,695-2,700, marked by new all-time high. There have been no confirmed negative signals so far. We still can see medium-term technical overbought conditions along with negative technical divergences:

Closer To Record High

Expectations before the opening of today's trading session are positive, with index futures currently up 0.3% vs. their yesterday's closing prices. The European stock market indexes have been mixed so far. There will be no new important economic data announcements today. The S&P 500 futures contract trades within an intraday uptrend, as it extends its yesterday's move up. The market gets closer to last week's record high. The nearest important level of resistance is at 2,695-2,700, marked by that record high. On the other hand, support level is at 2,680, among others. The futures contract breaks above its short-term consolidation this morning, as we can see on the 15-minute chart:

Nasdaq Relatively Weaker

The technology Nasdaq 100 futures contract retraces some of its yesterday's intraday move down. The nearest important level of resistance remains at around 6,480-6,500. marked by some recent fluctuations. On the other hand, support level is at 6,430-6,450, marked by short-term local lows. The Nasdaq 100 futures contract remains within its short-term consolidation, as the 15-minute chart shows:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The price reached new record high two weeks ago, as it broke above $175 mark. However, it failed to continue that rally and fluctuated along the level of $175. On Tuesday, the stock fell to support level of around $170, marked by the early November daily gap up. Is this a short-term bottom or just pause before another leg down?

The Dow Jones Industrial Average daily chart shows that blue-chip index continues to fluctuate following the early December move up. 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. There is a potential two-month-long rising wedge pattern:

Concluding, the S&P 500 index gained 0.2% on Thursday, as it extended its short-term advance. The broad stock market continues to fluctuate following the early December rally. Is this a topping pattern or just another relatively flat correction within an uptrend? We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far.

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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