Briefly:

Intraday trade: Our Tuesday's intraday trading outlook was neutral. It proved partly wrong because the S&P 500 lost 0.4% following neutral of the trading session. The index extended its short-term consolidation. We still can see some short-term technical overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market again, avoiding low risk/reward ratio trades.

Medium-term trade: In our opinion, no medium-term positions are justified.

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

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

The U.S. stock market indexes lost 0.2-0.5% on Tuesday, as investors took short-term profits off the table following recent advance. The S&P 500 index extended its relatively volatile short-term consolidation along the level of 2,650. It trades around 1.3% below Monday's new record high of 2,665.19. The Dow Jones Industrial Average was relatively weaker than the broad stock market yesterday, as it lost 0.5% and got closer to 24,000 mark again, retracing some of its Monday's rally to new record high of 24,534.04. The technology Nasdaq Composite lost 0.2%, after retracing some of its Monday's move up. It remains within a short-term consolidation along the level of 6,800-6,900. The nearest important level of support of the S&P 500 index is at around 2,625-2,630, marked by some recent fluctuations. The next support level remains at 2,600-2,610, marked by Friday's local low. The support level is also at at 2,590, marked by last Tuesday's daily gap up of 2,584.64-2,589.17. On the other hand, resistance level is at 2,650, marked by previous support level. The next level of resistance is at around 2,660-2,665, marked by all-time high. Will the S&P 500 index continue its uptrend? Or is this some relatively volatile topping pattern before medium-term downward correction? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:

Will Downtrend Continue?

Expectations before the opening of today's trading session are negative, with index futures currently down 0.2-0.4% vs. their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Nonfarm Productivity, Unit Labor Costs at 8:30 a.m., Crude Oil Inventories at 10:30 a.m. The market expects that Productivity grew 3.3% in the last quarter. The S&P 500 futures contract trades within an intraday consolidation following overnight move down. The nearest important level of resistance is at around 2,630, marked by short-term local high. The next resistance level is at 2,640-2,645, marked by yesterday's intraday consolidation. On the other hand, support level is at 2,600-2,620. The futures contract trades below its two-day-long downward trend line, as we can see on the 15-minute chart:

Nasdaq Still Weaker

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation after overnight move down. The market retraced its yesterday's bounce off support level at around 6,230. On the other hand, the nearest important level of resistance is at around 6,280-6,300, and the next resistance level remains at 6,340, marked by local high. The Nasdaq 100 futures contract extends its fluctuations along short-term local lows, as the 15-minute chart shows:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The price reached new record high on November 8, as it extended its uptrend following better-than-expected quarterly earnings release. Since then it fluctuated below the record high. Is this a topping pattern or just consolidation before another leg up? The price continues to trade close to support level, marked by the early November daily gap up:

The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index broke above its recent consolidation and reached new record highs above 24,000 mark. We still can see negative technical divergences. The most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low:

Concluding, the S&P 500 index lost 0.4% on Tuesday, extending its Monday's move down off new record high at the level of 2,665.19. It retraced 37.5 points of its recent rally. We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far. Is this a topping pattern or just another consolidation within an uptrend?

Currently, we prefer to be out of the market, avoiding low risk/reward ratio medium-term trades. We will let you know when we think it is safe to get back in the market.

To summarize: no medium-term positions are justified from the risk/reward perspective at this moment.

Intraday trade:

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

No medium-term position is justified from the risk/reward perspective at this moment.

Thank you.

Paul Rejczak
Stock Trading Strategist
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