Briefly:
Intraday trade: The S&P 500 index gained 0.9% after opening 0.5% higher on Tuesday. The broad stock market will likely open slightly lower today. We may see some more short-term volatility.
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 0.8-1.1% on Tuesday, retracing their Monday's decline, as investors' sentiment improved following some further trade war related news releases. Last week 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). Then it rebounded to the resistance level of around 2,890-2,900. It currently trades 3.0% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average gained 0.8% and the Nasdaq Composite gained 1.1% on Tuesday.
The nearest important resistance level of the S&P 500 index is now at 2,885-2,890, marked by the recent local highs. On the other hand, the support level is at 2,850-2,855. The support level is also at around 2,830, marked by Monday's local low.
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. Last week the S&P 500 index retraced some of its recent declines. For now, it looks like an upward correction before another leg down:
Flat Expectations - Short-Term Consolidation
Expectations before the opening of today's trading session are negative, because the index futures contracts trade between -0.3% and -0.4% vs. their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements today: Crude Oil Inventories at 10:30 a.m., the FOMC Meeting Minutes release at 2:00 p.m. The broad stock market will likely extend its short-term consolidation following the early May decline.
The S&P 500 futures contract trades within an intraday consolidation, as it extends its yesterday's fluctuations following higher opening of the trading session. The nearest important level of resistance is now at around 2,865-2,870, marked by the recent local highs. On the other hand, the support level is at 2,850, among others. The futures contract remains above its over-week-long upward trend line, as we can see on the 15-minute chart:
Nasdaq Also Going Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates following 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 more than a week ago. It retraced more than 300 points from that local low. But then it reversed its upward course again. The resistance level remains at around 7,500, marked by the recent local lows. On the other hand, the support level is now at 7,400. The Nasdaq futures contract keeps going sideways this morning, as the 15-minute chart shows:
Big Cap Tech Stocks - More Uncertainty
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. Since the previous week it is fluctuating below the short-term resistance level of $190:
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. On Friday it got back closer to the resistance level of $130-132, but then on Monday it retraced some of the advance:
Dow Jones Remains Below 26,000 Mark
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. Last week the blue-chip stocks' gauge followed the broad stock market, as it accelerated the downtrend. But then the market bounced off 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. A week ago it sold off to the 2,800 mark. Since then it trades within a short-term consolidation.
Concluding, the S&P 500 index will likely open slightly lower today. Then we may see some more short-term sideways trading action following the early May 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
