Briefly:
Intraday trade: The S&P 500 index gained 0.9% on Tuesday, after opening virtually flat. The broad stock market will likely open virtually flat to slightly higher today. We may see an attempt at breaking above the last year's record high.
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 0.6-1.3% on Tuesday, breaking above the short-term consolidation, as investors' sentiment improved following quarterly earnings releases, among other factors. The S&P 500 index retraced almost all of its medium-term downward correction of 20.2%. The broad stock market's gauge is now just 0.2% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average gained 0.6% and the Nasdaq Composite gained 1.3% on Tuesday.
The nearest important resistance level of the S&P 500 index is at around 2,940, marked by the mentioned record high. On the other hand, the support level is now at 2,920, marked by the recent resistance level. The support level is also at 2,900.
The broad stock market retraced all of its December sell-off and it broke above the medium-term resistance level of around 2,900 recently. 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 very close to its last October all-time high, as we can see on the daily chart:
Closer to Record High
Expectations before the opening of today's trading session are virtually flat to slightly positive, because the index futures contracts trade between 0.0% and +0.1% vs. their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for the Crude Oil Inventories number release at 10:30 a.m. They will also wait for more quarterly corporate earnings releases. Stocks will likely extend their short-term uptrend and they may reach the new all-time high today. There have been no confirmed negative signals so far. However, we can see some short-term technical overbought conditions.
The S&P 500 futures contract trades within an intraday uptrend, as it retraces its overnight decline. The nearest important resistance level is at around 2,940. On the other hand, the support level is at 2,930, among others. The futures contract fluctuates following its yesterday's rally, as the 15-minute chart shows:
Nasdaq Reaches New Records
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. It reached the new record high at around 7,840. The nearest important resistance level is at around 7,850-7,900. On the other hand, the support level is now at 7,750-7,800. The Nasdaq futures contract trades along the new record high this morning, as we can see on the 15-minute chart:
Tech Stocks' Rally Continues
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 broke above the $200 level. On Tuesday the market reached another new medium-term high:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock reached yet another new record high yesterday. The market continues to trade along the three-month-long upward trend line, as investors await today's after-hours' quarterly earnings release:
Dow Jones Also Higher
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 broke above its short-term consolidation yesterday and it got very close to the record high of 2,940.91. The broad stock market may reach the new record high today, as investors' sentiment remains very bullish ahead of quarterly corporate earnings releases. However, we can see some short-term technical overbought conditions that may lead to a downward correction at some point.
Concluding, the S&P 500 index will likely open virtually flat to slightly higher today. We may see an attempt at breaking above the last year's record high. Investors will await series of important 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
