Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Intraday outlook: The broad stock market will likely open lower today. The S&P 500 index may continue its short-term downtrend following negative U.S - China trade war developments.
The U.S. stock market indexes lost 2.9-3.1% on Wednesday, retracing most of their recent advances, as investors reacted to some new U.S. - China negative trade war developments. The S&P 500 index fell over 200 points from its record high of 3,027.98 early last week. Then it retraced more than 120 points of that sell-off. And now it is going down again. Both the Dow Jones Industrial Average and the Nasdaq Composite lost 3.1% yesterday.
The nearest important resistance level of the S&P 500 index is now at around 2,850, marked by the recent support level. The resistance level is also at 2,890-2,900. On the other hand, the support level is at 2,820-2,825, marked by the short-term local lows. The next resistance level is at 2,800.
The broad stock market broke below its two-month-long upward trend line recently, and then it quickly retraced most of the June-July advance. The S&P 500 index remains below the previous medium-term local highs. For now, it looks like a consolidation following the January-February advance. However, it could also play out as a long-term topping pattern ahead of a more meaningful downward correction:
Negative Expectations Again
The index futures contracts trade 0.2-0.5% below their yesterday's closing prices. So expectations before the opening of today's trading session are negative again. The European stock market indexes have lost 0.9-1.5% so far. Investors will wait for series of economic data announcements today: Retail Sales, Philly Fed Manufacturing Index, Empire State Manufacturing Index, Nonfarm Productivity, Unemployment Claims 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.
The S&P 500 futures contract trades within an intraday downtrend, as it extends yesterday's sell-off. The nearest important resistance level is at 2,850-2,870, and the support level is at 2,800-2,820. The futures contract is below its overnight low, as the 15-minute chart shows:
Nasdaq 100 Below 7,500 Mark
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. It got back closer to the 7,800 mark on Tuesday, before going sideways and reversing lower. Then it fell around 400 points. The nearest important support level is at 7,350-7,400. The Nasdaq futures contract broke below the 7,500 mark, as we can see on the 15-minute chart:
Tech Stocks Reversing Lower Again
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock retraced most of the recent decline on Tuesday, as it got back to the broken upward trend line. But then it reversed off the resistance level of $210-215. The market is close to the $200 price again:
Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock remains below the broken upward trend line. The resistance level is still at $140-145:
Dow Jones Below 200-day Moving Average
The Dow Jones Industrial Average broke below its upward trend line in late July. Then it fell to around 25,500, before bouncing off its 200-day moving average. Yesterday the blue-chip stocks' gauge got back lower and it broke below that average. There have been no confirmed positive signals so far:
The S&P 500 index broke below the upward trend line recently, as investors reacted to the Fed's Rate Decision release, among other factors. We saw technical overbought conditions along with negative technical divergences in the late July. And the market declined following renewed trade war fears. Last week it rebounded off the support level, but yesterday the index retraced most of the advance. If it breaks lower, we could see more selling pressure. However, we can see some short-term oversold conditions.
Concluding, the S&P 500 index will likely open lower today. The market may extend its short-term downtrend. But first, investors will await series of economic data releases.
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
