Briefly:

Intraday trade: Our Thursday's intraday trading outlook was neutral. It proved partly accurate because the S&P 500 gained 0.3% following neutral opening of the trading session. The index extended its short-term consolidation. We still can see some short-term technical overbought conditions. However, the index continues to trade relatively close to its record highs. 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 gained 0.3-0.5% on Thursday, retracing some of their recent move down, as investors' sentiment improved ahead of today's monthly jobs data release, among others. The S&P 500 index trades around 1.1% below Monday's new record high of 2,665.19. The Dow Jones Industrial Average gained 0.3% following slightly lower opening of the trading session. The technology Nasdaq Composite was relatively strong yesterday, as it gained 0.5%. It remains within a short-term consolidation along the level of 6,800. The nearest important level of support of the S&P 500 index remains at around 2,625, marked by short-term local low. The next support level is at 2,600-2,610, marked by Friday's low. The support level is also at 2,590, marked by the daily gap up of 2,584.64-2,589.17. On the other hand, resistance level is at 2,650, marked by previous support level. The next level of resistance 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 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:

Upward Reversal?

Expectations before the opening of today's trading session are positive, with index futures currently up 0.2-0.4% vs. their yesterday's closing prices. The European stock market indexes have gained 0.3-1.2% so far. Investors will wait for some important economic data announcements: Nonfarm Payrolls, Unemployment Rate at 8:30 a.m., Michigan Sentiment, Wholesale Inventories at 10:00 a.m. The market expects that Nonfarm Payrolls change was at +198,000 and the Unemployment Rate was at 4.1% in November. The S&P 500 futures contract trades within an intraday uptrend, as it extends its overnight move up. The market retraces its recent decline. The nearest important level of resistance is at around 2,650, marked by short-term local high. The next resistance level is at 2,660-2,665, marked by record high. On the other hand, support level is at 2,620-2,625, marked by recent fluctuations. The futures contract remains above its short-term upward trend line, as the 15-minute chart shows:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract trades within an intraday consolidation following overnight move up. The market extends its short-term uptrend following Tuesday's bounce off support level at around 6,230-6,250. The nearest important level of support is now at around 6,300-6,320, marked by recent fluctuations. On the other hand, resistance level is at 6,380-6,400, among others. The Nasdaq 100 futures contract trades closer to previous local highs, 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 a month ago on November 8, as it extended its uptrend following better-than-expected quarterly earnings release. Since then it fluctuated below the record high. Is this a topping pattern or just consolidation before another leg up? The price broke slightly below support level, marked by the early November daily gap up on Wednesday. However, it remains close to that support level:

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 recently. Then it slowly retraced some of its move up, as it got closer to 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 gained 0.3% on Thursday, as investors' sentiment improved ahead of today's important economic data announcements, among others. 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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