Briefly:

Intraday trade: The S&P 500 index lost 1.4% on Monday, after opening 0.4% lower. The stock market will probably retrace some of its yesterday's sell-off today. For now, it looks like an intraday upward correction. We prefer to be out of the market, avoiding low risk/reward ratio trades.

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

Our intraday outlook is neutral. 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 U.S. stock market indexes lost between 1.3% and 2.1% on Monday, accelerating their short-term downtrend, as investors' sentiment worsened following trade war fears, among other factors. The S&P 500 index fell to 2,700, before bouncing off that support level. It currently trades 5.4% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average lost 1.3% and the technology Nasdaq Composite lost 2.1% on Monday.

The nearest important level of resistance of the S&P 500 index is now at around 2,740-2,750, marked by the previous support level along with yesterday's daily gap down of 2,742.94-2,752.68. The next resistance level is at 2,780-2,800, On the other hand, support level is at around 2,695-2,700, marked by yesterday's daily low. The support level is also at 2,675-2,680, marked by the late May local low.

The broad stock market accelerated its short-term downtrend yesterday, as the S&P 500 index fell the lowest since the end of May. Will the downtrend continue? Or was it some final panic selling before an upward reversal? It's hard to say. If the index breaks below 2,700 mark, we could see more downward action. There are still two possible medium-term scenarios - bearish that will lead us below the February low following trend line breakdown, and the bullish one in a form of medium-term double top pattern or breakout towards 3,000 mark. There is also a chance that the market will just go sideways for some time, and that would be positive for bulls in the long run (some kind of an extended flat correction). The S&P 500 index broke below its two-month-long upward trend line recently:

Uncertainty Following Yesterday's Sell-off

The index futures contracts are trading between -0.1% and +0.2% vs. their Monday's closing prices. So expectations before the opening of today's trading session are virtually flat. The main European stock market indexes have gained 0.4-0.5% so far. Investors will now wait for some economic data announcements: Consumer Confidence number, Richmond Manufacturing Index at 10:00 a.m. The broad stock market will likely fluctuate after yesterday's sell-off. It probably won't retrace its whole move down quickly. We may see some short-term uncertainty, as the market remains close to the support level of around 2,700.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates after yesterday's intraday rebound. The nearest important level of resistance is at around 2,730, marked by the local high. The resistance level is also at 2,740-2,745. On the other hand, support level is at 2,700-2,710, among others. The futures contract trades below its recent local lows, as the 15-minute chart shows:

Nasdaq Closer to 7,000 Again

The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates after yesterday's intraday rebound. The market fell slightly below 7,000 mark, before bouncing off that support level. For now, it looks like a short-term upward correction. The nearest important level of resistance is at around 7,100-7,150, marked by the recent level of support. On the hand, support level remains at the above-mentioned 7,000 mark. The support level is also at 6,900. The Nasdaq futures contract trades slightly above the level of 7,000, as we can see on the 15-minute chart:

Big Cap Tech Stocks Selling Off

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It trades within a short-term downtrend since the beginning of the month. The decline accelerated yesterday, as price got closer to potential support level of $180. Will it continue lower? There have been no confirmed short-term positive signals so far:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It reached the new record high on Thursday, as it was relatively much stronger than the broad stock market. Then it reversed its uptrend on Friday and it accelerated lower yesterday. We saw negative technical divergences in the recent days. They signaled a potential downward reversal. There have been no confirmed short-term positive signals so far. The level of resistance is now at around $1,700:

Dow Jones also Lower

The Dow Jones Industrial Average broke below its two-month-long upward trend line a week ago on Tuesday. Then it continued lower, as it fell below the level of 24,500 on Thursday. The blue-chip index accelerated its short-term downtrend yesterday. There is a potential support level at around 24,000-24,250, along with the 200-day moving average:

The S&P 500 index fell the lowest since the end of May. Is this a new downtrend or just a downward correction within the medium-term consolidation? The market may extend its decline, but there is a potential level of support of around 2,700. We may see some short-term uncertainty here. There have been no confirmed positive signals so far.

Concluding, the broad stock market will likely open virtually flat today. The S&P 500 index may fluctuate along the support level of 2,700. If it breaks lower, we could see more selling pressure. For now, it looks like a downward correction within the medium-term consolidation.

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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