Briefly:
Intraday trade: The S&P 500 index lost 0.1% on Monday, after opening virtually flat. The broad stock market will probably open higher today. Then we may see a short-term consolidation following another advance.
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 virtually flat on Monday, as investors hesitated following Friday's rally and a breakout above the recent trading range. The S&P 500 index retraced more of its October-December downward correction of 20.2% on Friday. It broke above the 2,900 level. The broad stock market's gauge is now just 1.2% below September the 21st record high of 2,940.91. Both the Dow Jones Industrial Average and the Nasdaq Composite lost 0.1% on Monday.
The nearest important resistance level of the S&P 500 index remains at 2,920-2,940, marked by the mentioned record high, among others. On the other hand, the support level is at 2,900, marked by the recent resistance level. The support level is also at 2,860-2,865, marked by the recent local lows.
The broad stock market retraced all of its December sell-off and it broke above the medium-term resistance level of around 2,900 on Friday. So is it still just a correction or a new medium-term uptrend? We may see an attempt at getting back to the record high. There have been no confirmed negative medium-term signals so far. The index got closer to its last October all-time high, as we can see on the daily chart:
Positive Expectations, Uptrend to Continue?
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.3-0.5% above their Monday's closing prices. The European stock market indexes have gained 0.1-0.6% so far. Investors will wait for some economic data announcements today: Industrial Production, Capacity Utilization Rate at 9:15 a.m. They will also wait for more quarterly earnings releases. Stocks will likely extend their uptrend today. There have been no confirmed negative signals so far. However, we could see some more uncertainty as the broad stock market's gauge gets closer to the mentioned September's record high.
The S&P 500 futures contract trades within an intraday consolidation following an overnight advance. The nearest important resistance level is at around 2,920. On the other hand, the support level is at 2,900-2,910, among others. The futures contract is at the new local high this morning, 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 consolidation after extending its uptrend overnight. The nearest important resistance level is at around 7,700. On the other hand, the support level is at 7,600-7,650. The Nasdaq futures contract gets closer to the 7,700 mark, as we can see on the 15-minute chart:
Microsoft Higher Again, Apple Lags
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock accelerated its uptrend recently and it got close to the resistance level of $200. The market continues to trade along the medium-term upward trend line:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock reached yet another new record high yesterday as it extended its recent advance. The market continues to trade along the three-month-long upward trend line:
Dow Jones Remains at Local High
The Dow Jones Industrial Average broke above its February local high recently and it extended the medium-term uptrend. The next resistance level is at around 26,800-27,000, marked by the last year's topping pattern and the record high of 26,951.8. On Tuesday it retraced its recent advance. Then on Friday it got back closer to the local high again:
The S&P 500 index extended its medium-term uptrend on Friday, as it got the highest since the early October. The broad stock market broke above the week-long consolidation. We previously wrote that it looked like a flat correction within an uptrend. And it did. But will the market reach the September's record high? We may see some profit-taking action, as stocks trade closer to their resistance levels.
Concluding, the S&P 500 index will likely open higher today. Then we may see some uncertainty, as stocks trade closer to their September's record high. Investors will await more quarterly earnings releases.
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
