Briefly:

Intraday trade: The S&P 500 index gained 0.9% after opening 0.2% higher. The broad stock market will likely open lower today. We may see some more short-term uncertainty following the recent declines.

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 gained 0.8-1.0% on Thursday, extending their short-term uptrend, as investors' sentiment further improved following Monday's rebound off the support levels. The S&P 500 index fell the lowest since late March, and it got very close to the 2,800 mark (daily low at 2,801.43) on Monday. It currently trades 2.6% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average gained 0.8% and the Nasdaq Composite gained 1.0% on Thursday.

The nearest important resistance level of the S&P 500 index is now at 2,890-2,900, marked by the previous support level. The resistance level is also at 2,920-2,930. On the other hand, the support level is at 2,850-2,860. The support level is also at around 2,800-2,820, marked by the recent local lows.

The broad stock market retraced all of its December sell-off and it broke above the last year's high recently. But then the index broke below the short-term consolidation and it retraced all of the April's advance. The market also broke below its two-month-long upward trend line. Since Monday the S&P 500 index has been retracing some of its recent declines. For now, it looks like an upward correction:

More Short-Term Uncertainty

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.5-0.7% below their Thursday's closing prices. The European stock market indexes have lost 0.4-0.8% so far. Investors will wait for some economic data announcements today: Prelim UoM Consumer Sentiment, CB Leading Index at 10:00 a.m.

The broad stock market will likely fluctuate following its Wednesday's-Thursday's rebound. The index bounced off a 2,800 support level on Monday, and then it broke above the 2,850-2,860 level yesterday. So was it an upward reversal or just correction before another leg down? For now, it still looks like a correction. But if the market breaks above the mentioned resistance level of around 2,890-2,900, we could see more buying pressure.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of its yesterday's intraday advance. The nearest important level of resistance is at around 2,880-2,890, marked by the short-term local highs. On the other hand, the support level is at 2,850-2,860, among others. The futures contract bounced off the resistance level, as we can see on the 15-minute chart:

Nasdaq Below 7,600 Again

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its yesterday's advance. The market fell almost 600 points from its late April record high of around 7,880, before bouncing off the 7,300 mark on Monday. It retraced more than 300 points from that local low. The resistance level is now at around 7,600-7,650, marked by some previous local highs. On the other hand, the support level is at 7,450-7,500. The Nasdaq futures contract trades within an intraday downtrend this morning, as the 15-minute chart shows:

Microsoft Gets Closer to Record High, Apple Lags

Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock extended its rally on May the 1st following the quarterly earnings release. Then the price reversed its upward course and broke below the medium-term upward trend line. On Monday it accelerated the downtrend as it broke below the support level of $190-195:

Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock accelerated its uptrend in the late April, as it reached the new record high of $131.37. Investors reacted to a better-than-expected quarterly earnings release. Since then, the market was trading within a downward correction. Yesterday it got back to the broken upward trend line. The resistance level is at $130-132:

Dow Jones Bouncing

The Dow Jones Industrial Average has been relatively weaker than the broad stock market since February. The resistance level remained at around 26,800-27,000, marked by the last year's topping pattern and the record high of 26,951.8. On Monday the blue-chip stocks' gauge followed the broad stock market, as it accelerated the downtrend. But then the market bounced off the 25,500 mark, and at its important 200-day moving average:

The S&P 500 index has reached the new record high on May the 1st. The broad stock market extended its medium-term uptrend, as investors' sentiment remained very bullish following economic data, quarterly corporate earnings releases. But then it quickly retraced its April's advance following the renewed trade war fears. On Monday it sold off to the 2,800 mark. Since then it is trading within a short-term uptrend. For now, it looks like an upward correction. But if the index breaks above the 2,900 resistance level, we could see further advances.

Concluding, the S&P 500 index will likely open lower today and it may retrace some of the Wednesday's-Thursday's rally. For now, it looks like an upward correction following the recent declines.

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