Briefly:

Intraday trade: The S&P 500 index gained 0.2% on Monday, after opening virtually flat. The market will probably open higher today. We may some more short-term fluctuations along the medium-term support level.

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 0.1-0.7% on Monday following an intraday decline, as investors' sentiment improved later in the day. The S&P 500 index fell the lowest since the early April, as it reached the daily low of 2,583.23. It traded 12.2% below September the 21st record high of 2,940.91. The index is currently 10.3% below the all-time high. The Dow Jones Industrial Average gained 0.1% and the Nasdaq Composite gained 0.7% on Monday.

The nearest important level of resistance of the S&P 500 index is now at around 2,650, marked by the previous support level. The resistance level is also at 2,695-2,700, marked by the Thursday's daily gap down of 2,696.15-2,697.18. On the other hand, the support level is now at 2,580-2,600, marked by the medium-term local lows.

The broad stock market reversed its recent upward course following the S&P 500 index' reversal off the resistance level at 2,800. On Thursday the market broke below 2,700 mark, as it retraced more of the rally. Yesterday it fell the lowest since the early April, before bouncing off and getting above 2,600 mark at the end of the day. The market fell below its month-long upward trend line. There have been no confirmed positive signals so far. However, the index continues to trade above its previous local lows, as we can see on the daily chart:

Positive Expectations, Short-Term Uptrend to Continue?

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.8-0.9% above their Monday's closing prices. The European stock market indexes have gained 1.5-1.8% so far. Investors will wait for the Producer Price Index release at 8:30 a.m. The broad stock market will likely retrace some more of its recent decline today. We may see an attempt at breaking above the resistance level of around 2,650. It still looks like a volatile medium-term consolidation following the October decline despite yesterday's sell-off below 2,600 mark.

The S&P 500 futures contract trades within an intraday , as it continues retracing its recent decline. The nearest important level of resistance is at around 2,680-2,700, marked by the short-term local high. On the other hand, the support level is at 2,630-2,650, marked by the recent fluctuations. The futures contract extends its short-term consolidation, as the 15-minute chart shows:

Nasdaq is Relatively Stronger

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market fell closer to its late November lows yesterday. It was relatively stronger than the broad stock market, as it didn't reach the new medium-term low. Then the tech stocks' gauge gained more than 200 points. The nearest important resistance level is at 6,800-6,850. On the other hand, the support level is at 6,650-6,700, among others. The Nasdaq futures contract gets closer to its short-term downward trend line, as we can see on the 15-minute chart:

Apple's Upward Reversal?

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock extended its sell-off yesterday, following Friday's breakdown below the price of $170. It reached the new medium-term low of $163.33 yesterday. Then the market got back to $170. So was it a panic bottom before an upward reversal? There have been no confirmed positive signals so far. But we still can see technical oversold conditions:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It remains relatively stronger, as it still trades way above the November low. The stock bounced off $1,600 on Thursday, but it failed to continue higher on Friday. The resistance level remains at $1,750-1,800, marked by some previous local highs. The stock continues to trade below its two-month-long downward trend line, as we can see on the daily chart:

Dow Jones Also Reversing Higher

The Dow Jones Industrial Average got closer to 26,000 mark last week, as it accelerated its short-term uptrend, but then it quickly reversed lower. We saw more downward action on Thursday, as the index fell to around 24,250, before bouncing off to 25,000 again. On Friday, the blue-chip stocks' gauge fell closer to the support level again. And yesterday, it fell below 24,000 before bouncing off and closing virtually flat. Well, it looks like some short-term upward reversal:

The S&P 500 index quickly reversed its short-term uptrend last week following some negative U.S. - China trade war developments. It got back to 2,700 mark before the Wednesday's pause. On Thursday it continued towards the late October low of 2,603.54 before quickly bouncing off and retracing almost all of the daily decline. Then on Friday it sold off again, closing at the support level of 2,600-2,630. Yesterday, the broad stock market's gauge extended its downtrend, but then it got back above the support level. It looks like a pretty important upward reversal. But there have been no confirmed positive signals so far.

Concluding, the S&P 500 index will likely open higher today. We may see some more short-term volatility, as it gets closer to the recent local highs. The market may get back closer to 2,700 mark again.

Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts