Trading position (short-term; our opinion): We decided to close our profitable short position (with a stop-loss level at 3,100 and the downside target of 2,880 - S&P 500 index), opened at around 3,008 on July the 30th (the index opening level) this morning. The gains reached around 120 index points. No positions are justified from the risk/reward perspective right now.

Intraday outlook: The broad stock market will likely open much lower today. Then we may see a short-term consolidation or an upward correction following the recent decline.

The U.S. stock market indexes lost 0.4-1.3% on Friday, as investors reacted to the negative trade war developments and the monthly jobs data release. The S&P 500 index fell over 110 points of its Friday's new record high of 3,027.98 on Friday. The Dow Jones Industrial Average lost 0.4% and the Nasdaq Composite lost 1.3% on Friday.

The nearest important resistance level of the S&P 500 index is now at around 2,945-2,950, marked by the recent support level. The resistance level is also at 2,980. On the other hand, the support level is at 2,895-2,905, marked by the mid-June daily gap up of 2,897.27-2,905.44. The support level is also at 2,875, marked by the previous local low.

The broad stock market broke below its two-month-long upward trend line last week, and then it accelerated below the early May local high. Is this a downward reversal or just another correction within an over half-year-long medium-term uptrend? For now, it still looks like a downward correction:

Very Negative Expectations, Rebound Ahead?

The index futures contracts trade 1.4-1.9% below their Friday's closing prices, so expectations before the opening of today's trading session are negative again. The European stock market indexes have lost 1.8-2.2% so far. Investors will wait for the ISM Non-Manufacturing PMI release at 10:00 a.m.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following an overnight sell-off. The nearest important level of resistance is at around 2,900-2,910. On the other hand, the support level is at 2,885-2,890. The futures contract is below the 2,900 level right now, as we can see on the 15-minute chart

Nasdaq 100 Also Selling Off This Morning

The technology Nasdaq 100 futures contract follows a similar path, as it trades within a consolidation this morning. It sold off overnight following a breaking down below the recent local lows. The nearest important support level is now at 7,500. The Nasdaq futures contract trades along the new short-term local lows this morning, as the 15-minute chart shows:

Apple Below the Trend Line

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 its early May local high following 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:

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 Wednesday it retraced most of the advance and it broke slightly below the two-month-long upward trend line. Is this a new downtrend? For now, it looks like a medium-term consolidation:

Dow Jones Extending Short-Term Downtrend

The Dow Jones Industrial Average broke below its upward trend line on Wednesday. So the recent consolidation was a topping pattern. On Thursday the market broke below its previous medium-term high. There have been no confirmed positive signals so far:

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. But we could see a short-term bounce following the expected panic selling at the open.

Therefore, we are closing our profitable S&P 500's short position this morning.

Concluding, the S&P 500 index will likely open much lower today. Then the market may fluctuate following the decline. We could see an attempt at bouncing back. However, there have been no confirmed positive signals so far.

Trading position (short-term; our opinion): We decided to close our profitable short position (with a stop-loss level at 3,100 and the downside target of 2,880 - S&P 500 index), opened at around 3,008 on July the 30th (the index opening level) this morning. The gains reached around 120 index points. No positions are justified from the risk/reward perspective right now.

Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care