Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Intraday outlook: The broad stock market will likely open higher today. We may see some more short-term fluctuations following the sell-off. There may be more volatility in the near future.
The U.S. stock market indexes were mixed between -0.1% and +0.4% on Wednesday, extending their volatile short-term consolidation, as investors continued to hesitate following Friday's - Monday's sell-off. The S&P 500 index fell over 200 points from its previous Friday's record high of 3,027.98 on Monday. Since then, it has been bouncing up to around 2,900. The Dow Jones Industrial Average lost 0.1% and the Nasdaq Composite gained 0.4% on Wednesday.
The nearest important resistance level of the S&P 500 index remains at around 2,900-2,920, marked by Monday's daily gap down of 2,898.07-2,914.11. On the other hand, the support level is at 2.830-2,850.
The broad stock market broke below its two-month-long upward trend line last week, and then it quickly retraced most of the June-July advance. So, the S&P 500 index is back below the previous medium-term local highs again. 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:
Extending Short-Term Consolidation
The index futures contracts trade between +0.2% and +0.5% vs. their Wednesday's closing prices. So expectations before the opening of today's trading session are slightly positive. The European stock market indexes have gained 0.2-1.2% so far. Investors will wait for some economic data announcements: Unemployment Claims at 8:30 a.m., Final Wholesale Inventories at 10:00 a.m.
The S&P 500 futures contract trades within an intraday consolidation, as it remains close to the short-term local highs. The nearest important resistance level is at 2,895-2,900. On the other hand, the support level is at 2,865-2,880. The futures contract retraced slightly more of its recent sell-off this morning, as the 15-minute chart shows:
Nasdaq 100 at 7,600 Mark
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. It got back above the 7,500 mark. The nearest important resistance level is now at 7,600. The Nasdaq futures contract remains close to its local highs, as we can see on the 15-minute chart:
Tech Stocks - More Short-Term Fluctuations
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 last Tuesday's quarterly earnings release. However, the market reversed downwards off its new medium-term high and on Friday it broke below the upward trend line. On Monday it accelerated much lower, as it fell below $200 price:
Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock reached the new record high of $141.68 recently following quarterly earnings release. But on last week's Wednesday it retraced most of the advance and it broke below the two-month-long upward trend line. On Monday it accelerated lower. However, the price remains above the late April local high:
Dow Jones Still Above 200-day Moving Average
The Dow Jones Industrial Average broke below its upward trend line on Wednesday. So the recent consolidation was a topping pattern. Then the market broke below its previous medium-term high and on Monday it came back below the 26,000 mark. There have been no confirmed positive signals so far. However, we can see some short-term oversold conditions. And the index bounced off its 200-day moving average again:
The S&P 500 index broke below the upward trend line last week, as investors reacted to the Fed's Rate Decision release. 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. Since then, it keeps bouncing off Monday's local low. For now, it looks like a consolidation within a downtrend
Concluding, the S&P 500 index will likely open higher today. The market may extend its short-term consolidation again. There have been no confirmed positive signals so far.
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
