Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.

Intraday outlook: The broad stock market will likely open virtually flat today. The S&P 500 index may remain below the 2,900 mark. We could see more short-term volatility.

The U.S. stock market indexes lost 1.2-1.5% on Monday, retracing more of their Thursday's advance, as investors' sentiment worsened following economic data releases, trade war fears. The S&P 500 index fell over 200 points from its previous Friday's record high of 3,027.98 early last week. Then it retraced almost 120 points of that sell-off. The Dow Jones Industrial Average lost 1.5% and the Nasdaq Composite lost 1.2% on Monday.

The nearest important resistance level of the S&P 500 index is now at 2,900, marked by the recent support level. The resistance level is also at around 2,945-2,950, marked by the previous daily low and daily high. On the other hand, the support level is now at 2,860-2,875, marked by the recent fluctuations.

The broad stock market broke below its two-month-long upward trend line recently, and then it quickly retraced most of the June-July advance. The S&P 500 index remains below the previous medium-term local highs. For now, it looks like a consolidation following the January-February advance. However, it could also play out as a long-term topping pattern ahead of a more meaningful downward correction:

Flat Expectations, Short-Term Bottom or Just Pause?

The index futures contracts trade 0.1% below their Monday's closing prices. So expectations before the opening of today's trading session are virtually flat. The European stock market indexes have lost 0.4-0.8% so far. Investors will now wait for the Consumer Price Index release at 8:30 a.m.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following yesterday's decline. The nearest important resistance level is at around 2,890-2,900. On the other hand, the support level is now at 2,865-2,870. The futures contract is below its two-day-long downward trend line, as we can see on the 15-minute chart:

Nasdaq 100 Bounces Off 7,500

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. It broke below the 7,600 mark again. The nearest important resistance level is now at 7,600. On the other hand, the support level is at 7,500-7,550. The Nasdaq futures contract bounced off the 7,500 mark this morning, as the 15-minute chart shows:

Big Cap Tech Stocks Going Sideways

Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock continued to trade at the resistance level of $210-215 recently. It broke above the early May local high following quarterly earnings release. However, the market reversed downwards off its new medium-term high and then it broke below the upward trend line. On Thursday it got back above $200 price, as it retraced some of the sell-off:

Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock has reached new record high of $141.68 in the late July following quarterly earnings release. But recently it retraced most of the advance and it broke below the two-month-long upward trend line. On last Monday it accelerated lower. However, on Thursday and on Friday the price retraced some more of the decline and it got back to the broken trend line:

Dow Jones Relatively Weaker

The Dow Jones Industrial Average broke below its upward trend line recently. So the second half of July consolidation was a topping pattern. Then the market broke below the previous medium-term high and last week it came back below the 26,000 mark. There we saw short-term oversold conditions. And the index bounced off its 200-day moving average. However, it got back closer to the average yesterday. For now, it looks like a consolidation within a downtrend:

The S&P 500 index broke below the upward trend line recently, as investors reacted to the Fed's Rate Decision release, among other factors. We saw technical overbought conditions along with negative technical divergences recently. And the market turned lower. Then it accelerated the downtrend following renewed trade war fears. The market reversed its downtrend on Wednesday and on Thursday it accelerated higher following breaking above the 2,900 mark. However, it still looks like a correction within a downtrend. Yesterday the index retraced some more of the recent advance.

Concluding, the S&P 500 index will likely open virtually flat today. The market may continue to fluctuate following the early August decline.

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