Trading position (short-term; our opinion): Short position with a stop-loss level at 3,100 and the downside target of 2,880 (S&P 500 index) is justified from the risk/reward perspective.
Intraday outlook: The broad stock market will likely open lower today. We may see a short-term profit taking action following the recent advances.
The U.S. stock market indexes were mixed between -0.4% and +0.1% on Monday, as they fluctuated following the recent advance. The S&P 500 index reached the new record high of 3,027.98 on Friday. It gained around 300 points from its early June local low. The Dow Jones Industrial Average gained 0.1% and the Nasdaq Composite lost 0.4% on Monday.
The nearest important resistance level of the S&P 500 index remains at around 3,030, marked by the new record high. On the other hand, the support level is now at 3,000-3,010, marked by the short-term local lows. The support level is also at 2,975-2,980, marked by the mid-July local lows.
The broad stock market broke above its short-term consolidation recently and it broke above the 3,000 mark. Is this a real bullish breakout above the last year's September-October topping pattern? The S&P 500 index continues to trade close to the new all-time high:
Negative Expectations, Downward Reversal?
The index futures contracts trade 0.2-0.5% below their Monday's closing prices, so expectations before the opening of today's trading session are negative. The European stock market indexes have lost 0.1-1.5% so far. Investors will wait for series of economic data releases: Personal Income, Personal Spending at 8:30 a.m., CB Consumer Confidence, Pending Home Sales at 10:00 a.m. They will also wait for more important quarterly corporate earnings releases.
The S&P 500 futures contract trades within an intraday consolidation following an overnight decline. The nearest important resistance level is at around 3,025-3,030. On the other hand, the support level is at 3,000-3,010, among others. The futures contract broke below its short-term upward trend line yesterday, as we can see on the 15-minute chart:
Nasdaq 100 Also Lower
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation after retracing most of its yesterday's intraday rebound. It is below the 8,000 level again. The resistance level is at around 8,000-8,050. On the other hand, the support level is at 7,950. The Nasdaq futures contract is close to the recent local lows this morning, as the 15-minute chart shows:
Apple's Earnings Ahead
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock trades at the resistance level of $210-215. It was the highest since the early May yesterday. But will it extend the uptrend following Today's after-hours' quarterly earnings release? There have been no confirmed negative signals so far:
Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock reached the new record high of $141.68 on Friday following the recent quarterly earnings release. Will the uptrend continue? There have been no confirmed negative signals so far. However, we can see some clear negative technical divergences:
Dow Jones Continues Sideways
The Dow Jones Industrial Average continues to trade within a short-term consolidation. It remains close to the record high of 27,398.68. However, the blue-chip stocks' gauge is relatively weaker than the broad stock market. For now, it looks like a flat correction within an uptrend:
The S&P 500 index reached the new record high on Friday as it traded 1% above the 3,000 mark. Will the uptrend continue? We can see some technical overbought conditions along with negative technical divergences.
Therefore, opening short positions is justified from the risk/reward perspective.
Concluding, the S&P 500 index will likely open lower today. The market may continue to trade within a consolidation ahead of tomorrow's Fed Rate Decision and Friday's monthly jobs data release.
Trading position (short-term; our opinion): Short position with a stop-loss level at 3,080 and the downside target of 2,900 (S&P 500 index) is justified from the risk/reward perspective.
Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
