Trading position (short-term; our opinion): Short position with the downside target of 2,840 (S&P 500 index) remains justified from the risk/reward perspective. However, the outlook may change if the index breaks above the resistance level of 2,980-3,000.
Intraday outlook: The broad stock market will likely open higher today. We may see some more short-term volatility following the recent advance.
The U.S. stock market indexes gained 0.3-0.4% on Tuesday, as they fluctuated following Monday's advance and an intraday downward correction. The S&P 500 index reached the new record high of 2,977.93 on Monday. The index gained almost 250 points from its early June local low of around 2,729. 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 2,980-3,000. On the other hand, the support level is at 2,945-2,955, marked by Monday's daily gap up of 2,943.98-2,952.22. The next support level is at around 2,930.
The broad stock market broke above its previous Friday's record high on Monday and the S&P 500 index got even closer to the 3,000 mark. However, it remains relatively close to the previous medium-term local highs. And there is still no real bullish breakout above the last year's September-October topping pattern:
Positive Expectations, Will Uptrend Continue?
The index futures contracts trade 0.2-0.4% above their Tuesday's closing prices, so expectations before the opening of today's trading session are positive. The European stock market indexes have gained 0.7-0.8% so far. Investors will wait for series of economic data announcements today: ADP Non-Farm Employment Change at 8:15 a.m., Trade Balance, Unemployment Claims at 8:30 a.m., ISM Non-Manufacturing PMI, Factory Orders at 10:00 a.m., Crude Oil Inventories at 10:30 a.m.
The S&P 500 futures contract trades within an intraday uptrend, as it breaks above the recent local high. The nearest important resistance level is at 2,980-3,000. On the other hand, the support level is at 2,970-2,975, among others. The futures contract continues to trade above the short-term upward trend line, as we can see on the 15-minute chart:
Nasdaq Also Higher
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The nearest important resistance level is at 7,880-7,900, marked by the late April record high. On the other hand, the support level is at 7,800-7,850. The Nasdaq futures contract is now above the Monday's local high, as the 15-minute chart shows:
Big Cap Tech Stocks Going Sideways
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke slightly above the resistance level of $200 on Monday. However, we saw an intraday profit-taking action. The resistance level is now at $210-215, and the support level is at around $195:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock reached the new record high of $138.40 on the previous Monday, following breaking above the short-term consolidation. But last week's Tuesday's trading session was bearish, as the price fell to the previous short-term consolidation. For now, it looks like a consolidation:
Dow Jones Still Below Previous High
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 the previous Friday the index reached the new medium-term high, following breaking above its late April consolidation. However, then it retraced the recent advance. And it failed to break higher on Monday:
The S&P 500 index reached the new record high on Monday, as investors reacted to the G20 Osaka Summit outcomes. Will the uptrend continue? We may see some more short-term uncertainty following bouncing off the mentioned resistance level of 2,980-3,000. For now, it looks like a flat correction within an uptrend. However, if the market gets back below the 2,950 support level, we could see more selling pressure.
Concluding, the S&P 500 index will likely open higher today. Then we may see more uncertainty following the late Friday-early Monday's advance.
Trading position (short-term; our opinion): Short position with the downside target of 2,840 (S&P 500 index) remains justified from the risk/reward perspective. However, the outlook may change if the index breaks above the resistance level of 2,980-3,000.
On an administrative note, the 4th of July - the U.S. Independence Day is tomorrow, and the long weekend begins, which means that the trading should be limited as the U.S. markets will be closed tomorrow, and many traders will still be out of their offices until Monday. Consequently, there will be no regular Stock Trading Alerts (the same goes for our other Alerts) posted tomorrow and on Friday, but if anything changes regarding our outlook in the meantime, we will keep you informed via intraday Alerts.
Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
