Briefly:

Intraday trade: Our Tuesday's intraday trading outlook was neutral. It proved quite accurate because the S&P 500 index gained just 0.1% following relatively narrow intraday trading range. We still can see some short-term overbought conditions. Yesterday's reversal off new record high is a short-term negative signal. Therefore, intraday short position is favored. Stop-loss is at the level of 2,595 and potential profit target is at 2,545 (S&P 500 index).

Medium-term trade: In our opinion, no medium-term positions are justified.

Our intraday outlook is bearish today. Our short-term outlook is neutral, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral

The main U.S. stock market indexes were mixed between -0.2% and +0.3% on Wednesday, as investors took short-term profits off the table following recent rally. The S&P 500 index reached new record high at the level of 2,588.40, before closing slightly below 2,580. The Dow Jones Industrial Average was relatively stronger than the broad stock market, as it gained 0.3%. The blue-chip index reached new all-time high at the level of 23,517.71. The technology Nasdaq Composite reached new record high at the level of 6,759.66, but it closed 0.3% lower. The nearest important level of support of the S&P 500 index is at 2,570-2,575, marked by some recent local lows. The next support level remains at 2,560-2,565, marked by previous local lows. The support level is also at 2,545-2,550, marked by last Wednesday's daily low, among others. On the other hand, potential resistance level is at around 2,590-2,600, marked by record high. The S&P 500 index extended its over eight-year-long bull market yesterday, as it reached new record high closer to 2,600 mark. Will bull market continue? Or is this some topping pattern ahead of downward reversal? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions:

Uncertainty Ahead Of Economic Data, Earnings

Expectations before the opening of today's trading session are virtually flat, with index futures currently between -0.1% and -0.05% vs. their Wednesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Initial Claims, Productivity number at 8:30 a.m. The market expects that Initial Claims were at 235,000 last week. Investors will also wait for more quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday consolidation following yesterday's move down. The nearest important level of support is at around 2,560-2,565, marked by local lows. On the other hand, resistance level is at 2,580-2,585, marked by new record high. The futures contract trades below its short-term upward trend line, as we can see on the 15-minute chart:

Nasdaq Relatively Weaker

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its yesterday's intraday move down. The nearest important level of resistance is at around 6,260-6,280, marked by new all-time high. On the other hand, support level is at 6,200, among others. Investors will wait for quarterly earnings release from Apple after the session close. The Nasdaq 100 futures contract remains above 6,200 mark, 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 price broke above its September 1 all-time high on Monday. It reached new record high of $169.94 yesterday, before closing lower. We still can see some short-term overbought conditions. We can say that something (i.e. individual asset, entire market, technical indicator) is overbought when its value rises so high that (according to the technical analysis) it’s unlikely to advance even further. Generally, an overbought market is a sign that a downward correction is likely to occur. Traders use indicators such as Relative Strength Index (RSI), Stochastic Oscillator, Money Flow Index to identify overbought conditions. For example, one can view a given market as “overbought” if the RSI indicator for this market is above 70. We can see negative bearish engulfing pattern on the daily chart, will uptrend reverse?

The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index reached new all-time high yesterday, but it basically extended its over week-long consolidation. Is this a flat correction before another leg up or some topping pattern before downward reversal?

Concluding, the S&P 500 index reached new record high yesterday, before closing just 0.2% higher. Is this a topping pattern or just pause before another leg up? Will the market reach 2,600 mark? There have been no confirmed negative signals so far. However, we still can see medium-term overbought conditions along with negative technical divergences.

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:

S&P 500 index - short position: profit target level: 2,545; stop-loss level: 2,595,
S&P 500 futures contract (September) - short position: profit target level: 2,542; stop-loss level: 2,592
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $254.5; stop-loss level: $259.5

Medium-term trade:

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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