Briefly:
Intraday trade: The S&P 500 index gained 0.1% on Monday, after opening 0.2% lower. The broad stock market will likely open virtually flat today. We may see some more short-term consolidation following the recent rally.
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 mixed between -0.2% and +0.2% on Monday, as investors hesitated following the recent rally. The S&P 500 index retraced more of its October-December downward correction of 20.2% last week. The broad stock market's gauge is now just 1.1% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average was lost 0.2% and the Nasdaq Composite gained 0.3% yesterday.
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 recently. 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:
Flat Expectations Again
Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade between -0.1% and +0.1 vs. their Monday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements today: New Home Sales, Richmond Manufacturing Index at 10:00 a.m. They will also wait for more quarterly corporate earnings releases. Stocks will likely continue to fluctuate within a short-term consolidation. 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, as it continues to fluctuate along the medium-term local highs after breaking above the 2,900 level. The nearest important resistance level is at 2,910-2,915. On the other hand, the support level is at 2,895, among others. The futures contract remains slightly above the 2,900 mark, as the 15-minute chart shows:
Nasdaq at New Record
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. However, it reached the new record high at around 7,748. The nearest important resistance level is at around 7,750. On the other hand, the support level is at 7,650-7,700. The Nasdaq futures contract fluctuates following an overnight rally, as we can see on the 15-minute chart:
Big Cap Tech Stocks Rally
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 broke above the $200 level. Yesterday the market reached another new medium-term high:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock reached yet another new record high yesterday. The market continues to trade along the three-month-long upward trend line, as investors await tomorrow's quarterly earnings release:
Dow Jones at 26,500
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 Thursday the blue-chip stocks' gauge reached a new medium-term high. There have been no confirmed negative signals so far. However, we can see some negative technical divergences:
The S&P 500 index extended its medium-term uptrend last week and it got the highest since the early October. Then the broad stock market fluctuated, as investors were taking short-term profits off the table. Will the market reach the September's record high? We may see some more profit-taking action, as stocks trade closer to their resistance levels.
Concluding, the S&P 500 index will likely open virtually flat today. We may see some more uncertainty, as the broad stock market trades closer to its September's record high. Investors will await series of quarterly corporate 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
