Briefly:
Intraday trade: The S&P 500 index gained 0.1% on Monday, after opening 0.2% higher. The broad stock market will likely open higher today. Then we may see a short-term consolidation following another advance.
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 0.1-0.3% on Tuesday, slightly extending their short-term uptrend, as investors' sentiment remained bullish ahead of the quarterly earnings releases. The S&P 500 index retraced more of its October-December downward correction of 20.2%. It broke above the 2,900 level on Friday. The broad stock market's gauge is now just 1.2% below September the 21st record high of 2,940.91. Both the Dow Jones Industrial Average and the Nasdaq Composite gained 0.3% on Tuesday.
The nearest important resistance level of the S&P 500 index remains at 2,920-2,940, marked by the mentioned record high, among others. On the other hand, the support level is at 2,900, marked by the recent resistance level. The support level is also at 2,860-2,865, marked by the recent local lows.
The broad stock market retraced all of its December sell-off and it broke above the medium-term resistance level of around 2,900 on Friday. So is it still just a correction or a new medium-term uptrend? We may see an attempt at getting back to the record high. There have been no confirmed negative medium-term signals so far. The index got closer to its last October all-time high, as we can see on the daily chart:
Positive Expectations Again
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.2-0.3% above their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements today: Trade Balance at 8:30 a.m., Wholesale Inventories at 10:00 a.m., Crude Oil Inventories at 10:30 a.m., the Beige Book release at 2:00 p.m. They will also wait for more quarterly earnings releases. Stocks will likely continue to fluctuate along the local highs today. There have been no confirmed negative signals so far. However, we could see some more uncertainty as the broad stock market's gauge gets closer to the mentioned September's record high.
The S&P 500 futures contract trades within an intraday uptrend, as it retraces its yesterday's downward correction. The nearest important resistance level is at around 2,920. On the other hand, the support level is at 2,900-2,910, among others. The futures contract remains slightly below its yesterday's daily high, as the 15-minute chart shows:
Nasdaq at 7,700 Mark
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market is at the new medium-term high. The nearest important resistance level is at around 7,730, marked by the last year's record high. On the other hand, the support level is at 7,600-7,650. The Nasdaq futures contract is at the 7,700 mark this morning, as we can see on the 15-minute chart:
Apple Topping, Microsoft Reversing? Or Just a Pause Before Another Leg Up?
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock accelerated its uptrend recently and it got close to the resistance level of $200. The market continues to trade along the medium-term upward trend line:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock reached yet another new record high on Tuesday before reversing lower and closing 0.2% below its Monday's closing price. The market continues to trade along the three-month-long upward trend line:
Dow Jones at New Medium-Term High
The Dow Jones Industrial Average broke above its February local high recently and it extended the medium-term uptrend. The next resistance level is at around 26,800-27,000, marked by the last year's topping pattern and the record high of 26,951.8. Yesterday the blue-chip stocks' gauge reached a new medium-term high. There have been no confirmed negative signals so far. However, we can see some negative technical divergences:
The S&P 500 index extended its medium-term uptrend yesterday, as it got the highest since the early October. The broad stock market broke above the week-long consolidation recently. We previously wrote that it looked like a flat correction within an uptrend. And it did. But will the market reach the September's record high? We may see some profit-taking action, as stocks trade closer to their resistance levels.
Concluding, the S&P 500 index will likely open higher today. Then we may see some uncertainty, as stocks trade closer to their September's record high. Investors will await economic data and quarterly corporate earnings releases.
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
