Briefly:

Intraday trade: The S&P 500 index gained 0.2% after opening 0.1% higher on Monday. The broad stock market will likely open slightly lower today. We may see some short-term uncertainty, as stocks trade close to their medium-term resistance level. We prefer to be out of the market, avoiding low risk/reward ratio trades.

Trading position (short-term; our opinion): short positions in the S&P 500 Index (opened at the level of 2,810 on July the 30th) with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Our intraday outlook is neutral. Our short-term outlook is bearish, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes gained 0.2-0.5% on Tuesday, extending their short-term uptrend, as investors' sentiment remained bullish. The S&P 500 index reached the new record high at the level of 2,873.23, as it broke slightly above its January's 26th high of 2,872.87. However, it retraced most of its intraday gain later in the day and closed just 0.2% higher. The Dow Jones Industrial Average gained 0.2% and the technology Nasdaq Composite gained 0.5% yesterday.

The nearest important level of support of the S&P 500 index is now at around 2,860, marked by yesterday's daily gap up of 2,859.76-2,861.32. The next support level is at 2,830-2,835, marked by some short-term local lows. The support level is also at 2,825-2,830, marked by the last Thursday's daily gap up of 2,827.95-2,831.44. On the other hand, the level of resistance is at 2,870-2,875, marked by the record high. Potential resistance level is also at 2,900.

The broad stock market reached the new record high yesterday, as it broke slightly above the late January high. Will the S&P 500 index continue higher? There are still two possible medium-term scenarios - bearish that will lead us towards the February low again, and the bullish one - breakout higher towards 3,000 mark. The latter one got very real recently:

Uncertainty Following Recent Advance

Expectations before the opening of today's trading session are slightly negative, because the index futures contracts trade 0.1-0.2% lower vs. their Tuesday's closing prices. The European stock market indexes have gained 0.1-0.3% so far. Investors will now wait for some economic data announements: Existing Home Sales number at 10:00 a.m., Crude Oil Inventories at 10:30 a.m., FOMC Meeting Minutes release at 2:00 p.m. The broad stock market will probably open slightly lower or virtually flat today. We may see another attempt at breaking above the January high. There have been no confirmed negative signals so far. However, we can see some selling pressure at the medium-term resistance level.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its yesterday's intraday decline. The nearest important level of support is now at around 2,845-2,850, marked by the short-term local low. The support level is also at 2,835-2,840. On the other hand, the resistance level is at around 2,870. The futures contract remains above its short-term upward trend line, as we can see on the 15-minute chart:

Nasdaq Extends Consolidation

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its yesterday's intraday sell-off. The nearest important level of resistance is at around 7,420-7,450 again. The next resistance level is at 7,470-7,500, among others. On the other hand, level of support is at 7,350-7,370. The Nasdaq futures contract extends its week-long consolidation, as the 15-minute chart shows:

Big Cap Tech Stocks' Without New Record Highs

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached yet another new record high at the level of $219.18 on Monday before reversing and closing slightly lower. Its current market capitalization is at a spectacular $1.04 trillion. But will it last? There have been no confirmed negative signals so far. However, we may see a downward correction at some point. The nearest important level of support is now at $205-210, marked by the recent consolidation:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It has reached the new record high on Monday over a week ago at the level of $1,925.00. Since then it traded within a short-term consolidation. The nearest important level of resistance remains at around $1,925. On the other hand, support level is at 1,850. The stock continues to trade above its medium-term upward trend line, as we can see on the daily chart:

Dow Jones Continues Upwards

The Dow Jones Industrial Average reached the new local high on Tuesday, as it extended its last week's rally following breaking above its early August local high. It broke slightly above its late February local high of 25,800 yesterday. Is this a new uptrend? We can see some short-term overbought conditions, so the market may fluctuate along its local highs for a while:

The S&P 500 index broke above its early August local highs of around 2,860-2,865 yesterday. Then it reached the new record high of 2,873.23. Investors' sentiment remains pretty bullish following last Wednesday's bounce off support level of 2,800. Will stocks break higher and continue towards 3,000 mark? We may see some short-term uncertainty along the medium-term resistance level.

Concluding, the broad stock market will likely open slightly lower today. Then we may see some fluctuations close to the resistance level, marked by the late January high. There have been no confirmed negative signals so far.

Intraday trade:

No intraday position is justified from the risk/reward perspective today.

Trading position (short-term; our opinion): short positions in the S&P 500 Index (opened at the level of 2,810 on July the 30th) with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
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