Briefly:
Intraday trade: The S&P 500 index gained 0.5% after opening 0.5% higher on Monday. The broad stock market will likely open higher this morning. Then we may see a short-term consolidation following yesterday's intraday downward reversal.
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 0.3-1.1% on Monday, extending their short-term uptrend as investors' sentiment remained bullish. The S&P 500 index traded almost 180 points above its last week's Monday's local low. It is currently 2.3% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average gained 0.3% and the Nasdaq Composite gained 1.1% on Monday.
The nearest important resistance level of the S&P 500 index remains at 2,890-2,905. The resistance level is also at 2,930-2,950. On the other hand, the support level is at 2,875-2,880. The next support level remains at 2,830-2,850.
The broad stock market broke above the last year's high in the early May. But then the S&P 500 index retraced all of the April's advance. The market also broke below its two-month-long upward trend in the early May. And now it gets back higher following breaking above the month-long downward trend line:
S&P 500 at 2,900
Expectations before the opening of today's trading session are positive again, because the index futures contracts trade 0.4-0.6% above their Monday's closing prices. The European stock market indexes have gained 0.4-1.3% so far. Investors will wait for the Producer Price Index release at 8:30 a.m.
The broad stock market will likely fluctuate following its recent rally. The S&P 500 index reversed its intraday upward course yesterday and it got back below the 2,900 mark. We may see some more short-term profit-taking action.
The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of the yesterday's intraday decline. The nearest important level of resistance is at around 2,900-2,905. On the other hand, the support level is now at 2,880-2,885, marked by the short-term local lows. The futures contract trades along the 2,900 level this morning, as the 15-minute chart shows:
Nasdaq Above 7,500
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market extended its rally on Friday, following breaking above the resistance level of 7,250-7,300. Then it broke above the 7,500 mark and entered a short-term consolidation. The nearest important resistance level is at 7,550-7,600. The Nasdaq futures contract continues to trade above its over week-long upward trend line, as we can see on the 15-minute chart:
Microsoft - New Record High and Reversal
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock extended its rally on May the 1st following the quarterly earnings release. Then the price reversed the upward course and broke below the medium-term upward trend line. Since then it was trading within a downtrend. And on Tuesday a week ago the stock broke above its downward trend line. For now, it looks like an upward correction:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock accelerated its uptrend in late April. Since then, the market was trading within a consolidation. On Monday a week ago it broke below the support level, but then it got back higher. It reached the new record high of $134.08 yesterday, before reversing its intraday uptrend:
Dow Jones Remains Close to 26,000
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. Early last week the blue-chip stocks' gauge followed the broad stock market, as it accelerated the downtrend. The market broke below its important 200-day moving average. On Tuesday it came back above the 25,000 mark, and on Wednesday it got back above the 200-day moving average. The resistance level remains at around 26,000, marked by the previous local highs:
The S&P 500 index accelerated its short-term downtrend a week ago, as it fell to the local low of around 2,729 on Monday. Then the market broke above the month-long downward trend line and kept retracing its late May decline. Will it get back to the record high? There have been no confirmed negative signals so far. However, we can see some short-term overbought conditions.
Concluding, the S&P 500 index will likely open higher today. Then we could see some more profit-taking action following yesterday's intraday downward reversal.
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
