Briefly:

Intraday trade: The S&P 500 index gained 0.8% after opening 0.2% higher. The broad stock market will likely open slightly lower today. We may see some more short-term uncertainty following the recent declines.

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 0.8-1.1% on Tuesday, retracing some of their Monday's decline, as investors' sentiment slightly improved. The S&P 500 index fell the lowest since late March, and it got very close to the 2,800 mark (daily low at 2,801.43) on Monday. It currently trades 4.0% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average gained 0.8% and the Nasdaq Composite gained 1.1% on Tuesday.

The nearest important resistance level of the S&P 500 index is now at around 2,850-2,860, marked by the recent local low. The resistance level is also at 2,880-2,900. On the other hand, the support level is at 2,800-2,820. The support level is also at around 2,785, marked by some previous local lows.

The broad stock market retraced all of its December sell-off and it broke above the last year's high recently. But then the index broke below the short-term consolidation and it retraced all of the April's advance. The market also broke below its two-month-long upward trend line, as we can see on the daily chart:

Short-Term Consolidation

Expectations before the opening of today's trading session are slightly negative, because the index futures contracts trade 0.1-0.2% below their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for series of economic data announcements today: Empire State Manufacturing Index, Retail Sales number at 8:30 a.m., Industrial Production, Capacity Utilization Rate at 9:15 a.m., Business Inventories, NAHB Housing Market Index at 10:00 a.m., Crude Oil Inventories at 10:30 a.m.

The broad stock market will likely continue to fluctuate following Monday's sell-off. The index bounced off a 2,800 support level on Monday, and then it reached the 2,850 mark yesterday. So was it an upward reversal or just correction before another leg down? For now, it looks like a correction.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following its yesterday's advance. The nearest important level of resistance is at around 2,845-2,850. On the other hand, the support level is at 2,820, among others. The futures contract is close to the previous local low this morning, as the 15-minute chart shows:

Nasdaq Also Going Sideways

The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates following yesterday's rebound. The market fell almost 600 points from its late April record high of around 7,880, before bouncing off the 7,300 mark. The resistance level is at around 7,450, marked by the local high. On the other hand, the support level is at 7,350. The Nasdaq futures contract trades along the 7,400 mark, as we can see on the 15-minute chart:

Big Cap Tech Stocks - Uncertainty Following the Sell-Off

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 its upward course and broke below the medium-term upward trend line. On Monday it accelerated the downtrend as it broke below the support level of $190-195:

Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock accelerated its uptrend in the late April, as it reached the new record high of $131.37. Investors reacted to a better-than-expected quarterly earnings release. But it looked like a blow-off topping pattern. And we wrote about some clear technical overbought conditions. Since then, the market is trading within a downward correction. It remains above the support level of $120-125:

Dow Jones at 25,500 Mark

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 Monday the blue-chip stocks' gauge followed the broad stock market, as it accelerated the downtrend. The market is now close to the 25,500 mark, and at its important 200-day moving average:

The S&P 500 index has reached the new record high on May the 1st. The broad stock market extended its medium-term uptrend, as investors' sentiment remained very bullish following economic data, quarterly corporate earnings releases. But then it quickly retraced its April's advance following the renewed trade war fears. On Monday it sold off to the 2,800 mark. Yesterday it bounced to 2,850 but then it closed at around 2,835.

Concluding, the S&P 500 index will likely open lower today. For now, it looks like a consolidation following the recent decline. There have been no confirmed positive signals so far.

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