Briefly:
Intraday trade: The S&P 500 index gained 0.2% after opening 0.1% higher on Thursday. The broad stock market will likely open lower today. We may see a breakdown below the short-term local lows.
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 0.2-0.3% on Thursday, as they retraced some of the Thursday's decline following more trade war jitters. The S&P 500 index fell the lowest since the early March on Wednesday after breaking below the 2,800 mark. It currently trades 5.6% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average gained 0.2% and the Nasdaq Composite gained 0.3% on Thursday.
The nearest important resistance level of the S&P 500 index remains at around 2,795-2,800, marked by Wednesday's daily gap down of 2,792.03-2,801.58. The next resistance level is at
2,835-2,850, marked by last Thursday's daily gap down of 2,836.70-2,851.11. On the other hand, the support level is at 2,765-2,770, marked by Wednesday's local low. The next support level is at 2,750. The support level is also at 2.720-2,725, marked by the early March local low.
The broad stock market broke above the last year's high in the early May. But then the index retraced all of the April's advance. The market also broke below its two-month-long upward trend line recently. The index fell below the 2,800 mark on Wednesday and it extended its month-long decline, as we can see on the daily chart:
Very Negative Expectations
Expectations before the opening of today's trading session are very negative, because the index futures contracts trade 1.1-1.4% below their yesterday's closing prices. The European stock market indexes have lost 1.0-1.9% so far. Investors will wait for some economic data announcements today: Personal Spending, Personal Income at 8:30 a.m., Chicago PMI at 9:45 a.m., Revised UoM Consumer Sentiment at 10:00 a.m.
The broad stock market will likely extend its short-term downtrend following the overnight tariffs on Mexico news. The index will likely break below its Wednesday's local low. We may see an attempt at breaking below the mentioned support level of 2,750. There have been no confirmed positive signals so far.
The S&P 500 futures contract trades within an intraday downtrend, as it gets closer to the 2,750 mark. The nearest important resistance level is now at 2,765-2,770, and the support level is at around 2,750. The futures contract extends its downtrend this morning, as we can see on the 15-minute chart:
Nasdaq Also Lower
The technology Nasdaq 100 futures contract follows a similar path, as it extends its short-term downtrend this morning. The nearest important resistance level is now at 7,200. On the other hand, the support level is at 7,100-7,150. The Nasdaq futures contract trades below its three-day-long downward trend line, as the 15-minute chart shows:
Apple, Microsoft - Going Sideways
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 traded within a downtrend. The nearest important support level remains at $175-180. The market remains within a week-long consolidation, as we can see on the daily chart:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock accelerated its uptrend in late April, as it reached the new record high of $131.37. Investors reacted to a better-than-expected quarterly earnings release. Since then, the market is trading within a consolidation. It remains relatively stronger than the broad stock market:
Dow Jones - Will It Remain Above 25,000?
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. On Wednesday 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:
The S&P 500 index extended its short-term downtrend on Wednesday, as it fell below the 2,800 mark. It was the lowest since the early March. It seems that the decline will continue today following the ongoing trade war fears. For now, it looks like a medium-term downward reversal.
Concluding, the S&P 500 index will likely open lower today. The market may reach the support level of 2,750. Then we could see an attempt of bouncing off that support level. However, 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
