Briefly:

Intraday trade: Our Thursday's intraday trading outlook was neutral. It proved partly wrong, because the S&P 500 gained 0.4% following higher opening of the trading session (+0.2%). The market broke slightly above its last Tuesday's new record high, but the intraday trading range was relatively narrow. We still can see some clear short-term overbought conditions along with an overly bullish investors' sentiment. However, there have been no confirmed negative signals so far. We prefer to be out of the market today, 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 0.2-0.6% on Friday, extending their uptrend slightly, as investors' sentiment remained bullish. The S&P 500 index has reached new record high at the level of 2,810.33. It broke above its Tuesday's high of 2,807.54. The Dow Jones Industrial Average remained below its Thursday's new record high of 26,153.42 on Friday, as it was relatively weaker than the broad stock market. The technology Nasdaq Composite reached new record high of 7,336.38, as it gained 0.6%. The nearest important level of support of the S&P 500 index is at 2,800, marked by previous resistance level. The next support level is at around 2,780, marked by some recent local lows. The support level is also at 2,765-2,770, marked by the January 11 daily gap up of 2,767.56-2,769.64. We still can see medium-term technical overbought conditions along with negative technical divergences. However, the market continues to extend its nine-year-long bull market:

Slightly Negative Expectations

Expectations before the opening of today's trading session are slightly negative, with index futures currently down 0.1-0.2% vs. their Friday'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 consolidation, as it fluctuates slightly below Friday's new record high. The nearest important level of resistance is at around 2,810. On the other hand, support level is at 2,790-2,800, marked by recent local lows. The next level of support remains at 2,770-2,780. The futures contract trades above its short-term upward trend line, as we can see on the 15-minute chart:

Close To Record High

The technology Nasdaq 100 futures contract follows a similar path, as it trades slightly below its new record high. The nearest important level of resistance is at around 6,850. On the other hand, support level is at 6,800-6,830, marked by short-term consolidation. The Nasdaq 100 futures contract continues to trade above 6,800 mark. It also remains above its short-term upward trend line, 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 stock reached new record high on Thursday, following short-term consolidation along the support level of $175. The market got closer to $180 mark, but it failed to continue its short-term uptrend on Friday. We still can see some 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.

Amazon.com, Inc. stock (AMZN) was relatively stronger than the broad stock market recently. It accelerated its medium-term uptrend and broke above $1,300 mark. We can see some relative weakness since Tuesday, as the price fluctuates below its new record high. Is this an uptrend reversal or just quick correction before another leg up?

The Dow Jones Industrial Average daily chart shows that blue-chip index reached new record high on Thursday, but it failed to continue its short-term uptrend on Friday. Was Thursday's intraday reversal some topping pattern? The nearest important level of support remains at around 25,000-25,500. The index trades above its two-month-long rising wedge pattern:

Concluding, the S&P 500 index gained 0.4% on Friday, as it reached new record high. The broad stock market broke above its Tuesday's high, however, Friday's intraday trading range was relatively narrow. Will uptrend continue despite some clear technical overbought conditions and negative technical divergences? For now, it looks like a consolidation within an uptrend. 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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