Briefly:

Intraday trade: The S&P 500 gained 1.1% on Thursday, after opening 0.1% lower. The market will probably open lower today. We may see some short-term uncertainty and a profit-taking action following Thursday's rally.

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 0.8-1.4% on Thursday, as investors reacted to the Wednesday's FOMC Statement release. The S&P 500 index retraced more of its October-December downward correction of 20.2%. The broad stock market's gauge is just 2.9% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average gained 0.8% and the Nasdaq Composite gained 1.4% on Thursday.

The nearest important resistance level of the S&P 500 index remains at 2,850-2,860, marked by the early October local lows. The resistance level is also at around 2,875, marked by October the 10th daily gap down of 2,874.02-2,874.27. On the other hand, the support level is now at at 2,800-2,820, marked by the recent resistance level and the daily gap up of 2,798.32-2,799.78. The support level is also at 2,785, marked by the daily gap up of 2,784.00-2,786.73.

The broad stock market retraced all of its December sell-off and it broke above the medium-term resistance level of around 2,800-2,820, marked by the October-November local highs recently. So is it still just a correction or a new medium-term uptrend? The market broke above the 61.8% Fibonacci retracement of the 20% decline. And we may see an attempt at getting back to the record highs. But will the index continue much higher above the mentioned previous local highs? There have been no confirmed negative signals so far. The index is still close to the previously broken two-month-long upward trend line:

Negative Expectations, Just Correction?

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.4% below their yesterday's closing prices. The European stock market indexes lost 0.5-1.0% so far. Investors will wait for some economic data announcements today: Flash Manufacturing PMI, Flash Services PMI at 9:45 a.m., Existing Home Sales, Final Wholesale Inventories at 10:00 a.m. The broad stock market will likely fluctuate following its yesterday's rally. We may see some short-term profit-taking action today.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of its yesterday's advance. The nearest important level of resistance is now at 2,860-2,865, marked by the local high. On the other hand, the support level is at 2,840-2,850, marked by the recent resistance level. The futures contract is now slightly below its Monday's local high, as the 15-minute chart shows:

Nasdaq Also Slightly Lower

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. The market rallied more than 1,700 points from December the 26th local low of around 5,820. The nearest important resistance level is now at 7,500-7,550. On the other hand, the support level is at 7,400-7,450, marked by the recent resistance level. The Nasdaq futures contract trades along the 7,500 mark this morning, as we can see on the 15-minute chart:

Big Cap Tech Stocks Rally

Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The market broke above its recent local highs a week ago and then it continued above the $180 level. Yesterday the stock accelerated the uptrend and it got to a possible resistance level of $190-200. There have been no confirmed negative signals so far:

Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The price broke above the previous local high on Monday and yesterday it broke above the $1,800 level. The market extends the recent run-up above the broken downward trend line. However, we can see some short-term overbought conditions:

Dow Jones Still at 26,000

The Dow Jones Industrial Average retraced some more of its recent decline on Tuesday, following bouncing off the support level of around 25,000-25,500 a week ago. However, then it reversed its upward course and bounced off the 26,000 mark. Yesterday it traded close to 26,000 again, but overall blue chip stocks remained relatively weaker than the broad stock market:

The S&P 500 index extended its short-term uptrend yesterday, as it got the highest since October the 10th again. The market came back to the previously broken two-month-long upward trend line recently. So will it act as a resistance level? We could see some short-term uncertainty, as stocks reach their previous medium-term highs.

Concluding, the S&P 500 index will likely open lower today. We may see some profit-taking action following yesterday's run-up.

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