Briefly:
Intraday trade: The S&P 500 lost 0.8% on Thursday, after opening 0.2% lower. The market will probably open lower again today. However, investors will wait for the monthly jobs data release at 8:30 a.m.
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 lost 0.8-1.1% on Thursday, as investors continued to take profits off the table following two-month-long advance. The S&P 500 index retraced more of its October-December downward correction of 20.2% on Monday, before reversing its intraday advance and getting back below the 2,800 level. The market fluctuated close to the previous medium-term local highs and then it broke lower. The Dow Jones Industrial Average lost 0.% and the Nasdaq Composite lost 1.1% on Thursday.
The nearest important resistance level of the S&P 500 index is now at around 2,765-2,770, marked by the recent local lows. The resistance level is also at 2,800-2,820, marked by the medium-term local highs. On the other hand, the support level is now at 2,730, marked by the mid-February local low. The next support level is at around 2,720, marked by February the 11th daily gap up of 2,718.05-2,722.61.
The broad stock market retraced all of its December sell-off and it got close to the medium-term resistance level of around 2,800, marked by the October-November local highs. So is it still just a correction or a new medium-term uptrend? The market broke above the 61.8% Fibonacci retracement of the 20% decline. And we may see an attempt at getting back to the record highs. But will the index break above the mentioned previous local highs? There have been no confirmed negative signals so far. However, the index broke below the two-month-long upward trend line yesterday:
Negative Expectations as Investors Await Jobs Data Release
Expectations before the opening of today's trading session are negative again, because the index futures contracts trade 0.6-0.9% below their Thursday's closing prices. The European stock market indexes have lost 0.4-0.9% so far. Investors will wait for some important economic data announcements today: Non-Farm Payrolls number, Unemployment Rate, Building Permits, Housing Starts at 8:30 a.m. There will also be a speech from the Fed Chair Powell at 10:00 a.m. The broad stock market will likely extend its short-term downward correction today. We may see some more uncertainty as the market bounced off the mentioned medium-term local highs.
The S&P 500 futures contract trades within an intraday consolidation following an overnight decline. The nearest important level of support is now at around 2,735-2,740, marked by the short-term local lows. On the other hand, the resistance level is at 2,750-2,760, among others. The futures contact remains below the short-term downward trend line, as the 15-minute chart shows:
Nasdaq Closer to 7,000 Mark
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation after retracing its yesterday's intraday bounce overnight. The market got back closer to the 7,000 mark, as investors took profits off the table following an almost 1,400-point rally from December the 26th local low of around 5,820. The nearest important resistance level is now at around 7,100-7,150. The Nasdaq futures contract is close to the yesterday's intraday low, as we can see on the 15-minute chart:
Big Cap Tech Stocks Reversing Lower
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The market retraced some more of the November-December sell-off recently. And now it is extending the consolidation along the level of $170-175. But will it come back above $200? For now, it still looks like a medium-term upward correction following the November-December sell-off:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The market broke above its medium-term downward trend line on Monday but then it came back lower. There is a relatively important resistance level of around $1,740-1,750, marked by the previous local high:
Dow Jones at the Support Level
The Dow Jones Industrial Average extended its short-term uptrend a week ago, but then it reversed lower. The blue-chip stocks' gauge fell below the 26,000 mark on Monday. For now, it looks like a downward correction. However, if the market breaks below the previous resistance level of 25,500, we could see more selling pressure:
The S&P 500 index slightly extended its recent run-up on Monday, before reversing lower and closing below the 2,800 level that day. Then it retraced some more of its recent advances and it broke below the two-month-long upward trend line yesterday. So it bounced off the mentioned medium term resistance level. For now it looks like a correction within an uptrend.
Concluding, the S&P 500 index will likely open lower today. It may extend the recent downward trading action. However, investors have yet to react to the monthly jobs data release at 8:30 a.m.
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
