Briefly:

Intraday trade: Our Tuesday's intraday trading outlook was neutral. It proved wrong because the S&P 500 gained 0.2% following slightly higher opening of the trading session. The index extended its short-term uptrend, as it reached new record high. There have been no confirmed negative signals so far. However, we can see some short-term technical overbought conditions. Therefore, intraday short position is favored today. Stop-loss is at the level of 2,680 and potential profit target is at 2,640 (S&P 500 index).

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

Our intraday outlook is bearish again. 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 U.S. stock market indexes were mixed between -0.2% and +0.5% on Tuesday, as investors hesitated following recent rally. The S&P 500 has reached new all-time high at the level of 2,669.72, before retracing some of its intraday advance. The Dow Jones Industrial Average was relatively stronger than the broad stock market, as it gained 0.5%. It currently trades slightly above the level of 24,500. The technology Nasdaq Composite lost 0.2% yesterday. The nearest important level of support of the S&P 500 index is at around 2,660, marked by yesterday's daily low. The next support level is at 2,650. The support level is also at 2,640, marked by Friday's daily gap up of 2,640.99-2,644.10. On the other hand, resistance level is at around 2,665-2,670, marked by new all-time high. Will the S&P 500 index continue its uptrend? Or is this some 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:

Mixed Expectations

Expectations before the opening of today's trading session are virtually flat, with index futures currently between -0.05% and +0.1% vs. Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Consumer Price Index at 8:30 a.m., Crude Oil Inventories at 10:30 a.m., the FOMC Rate Decision release at 2:00 p.m. The market expects that the Consumer Price Index was at +0.4% in November. The S&P 500 futures contract trades within an intraday uptrend following yesterday's intraday move down. The nearest important level of resistance is at around 2,670, marked by record high. On the other hand, support level is at 2,660, marked by local low, and the next level of support is at 2,650-2,655, marked by recent fluctuations. The futures contract trades below its short-term upward trend line, as we can see on the 15-minute chart:

Nasdaq Closer To Record High

The technology Nasdaq 100 futures contract trades within an intraday uptrend, as it extends its short-term move up. The nearest important level of resistance is at 6,420-6,430, marked by record high. On the other hand, support level is at 6,400, and the next level of support remains at 6,370-6,380, marked by recent fluctuations. The Nasdaq 100 futures contract trades above the level of 6,400, 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 reached new record high a month ago, as it extended its uptrend following better-than-expected quarterly earnings release. Since then it fluctuated along the level of $170. The price bounced off support level of the early November daily gap up on Monday. Will it continue higher despite negative technical divergences?

The Dow Jones Industrial Average daily chart shows that blue-chip index broke slightly above its last week's record high yesterday. 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 0.2% on Tuesday, as it slightly extended its short-term move up. The broad stock market reached new record high of 2,669.7, around 5 points above its last week's Monday's record high. Will uptrend continue? Or is this some topping pattern before downward correction? We still can see medium-term overbought conditions along with negative technical divergences. However, 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:

S&P 500 index - short position: profit target level: 2,640; stop-loss level: 2,680,
S&P 500 futures contract (September) - short position: profit target level: 2,637; stop-loss level: 2,677
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $264.0; stop-loss level: $268.0

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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