Briefly:
Intraday trade: The S&P 500 gained 0.1% on Monday, after opening 0.3% higher. The market will probably open lower today. We may see some profit-taking action following the recent 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 0.1-0.4% on Monday, slightly extending their short-term uptrend, as investors' sentiment remained bullish. The S&P 500 index retraced more of its October-December downward correction of 20.2%. It got closer to the previous local highs along the 2,800 level. The Dow Jones Industrial Average gained 0.2% and the Nasdaq Composite gained 0.4% on Monday.
The nearest important resistance level of the S&P 500 index remains at around 2,800-2,820, marked by the previous medium-term local highs. On the other hand, the support level is now at around 2,795, marked by the yesterday's daily gap up of 2,794.20-2,794.99. The next support level is at 2,765-2,780, marked by the recent local lows. The support level is also at the previous Friday's daily gap up of 2,757.90-2,760.24.
The broad stock market retraced all of its December sell-off and it got close to the medium-term resistance level of around 2,800, marked by the October-November local highs. 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 break above the mentioned previous local highs? There have been no confirmed negative signals so far:
Uncertainty Following Yesterday's Decline
Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.2-0.3% below vs. their yesterday's closing prices. The European stock market indexes have lost 0.3-1.0% so far. Investors will wait for some economic data announcements today: Building Permits, Housing Starts at 8:30 a.m., Consumer Confidence, Richmond Manufacturing Index at 10:00 a.m. There will also be a Testimony from Fed Chair Powell at 9:45 a.m. The broad stock market will likely retrace some of its recent advance in the near term. It may fluctuate along the level of 2,800.
The S&P 500 futures contract trades within an intraday consolidation following yesterday's intraday decline. The nearest important support level is at around 2,780-2,785, marked by the short-term local lows. On the other hand, the resistance level is at 2,800-2,815. The futures contract broke below its short-term upward trend line, as the 15-minute chart shows:
Nasdaq Also Going Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market gained more than 1,300 points from December the 26th local low of around 5,820. The nearest important resistance level remains at 7,100-7,150. The support level is now at 7,000-7,050, marked by the recent resistance level. The Nasdaq futures contract retraces some of its recent rally, as we can see on the 15-minute chart:
Big Cap Tech Stocks - No Clear Direction
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke above its January's trading range and the resistance level of $155-160 following the quarterly earnings release. It retraced some more of its November-December sell-off. But then it bounced off $175. Yesterday the market came back to the local high but then we saw some profit-taking action. 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 market broke above one of its three-month-long downward trend lines two months ago. Since then it has been going sideways. There is a resistance level at around $1,700-1,750. Recently it bounced off that resistance level following the quarterly earnings release. The stock got closer to the downward trend line again, but then it came back slightly lower again. Overall, it looks like a sideways trend:
Dow Jones Higher Again
The Dow Jones Industrial Average extended its short-term uptrend on Monday, as it remained above the 26,000 mark. So will it continue even higher and reach the record high? Or reverse lower in the near term? There have been no confirmed negative signals so far:
The S&P 500 index slightly extended its recent run-up yesterday. It is now close at the medium term resistance level of around 2,800. Is this a new medium-term uptrend or still just upward correction before another medium-term leg lower? The market trades above the 61.8% Fibonacci retracement of the whole medium-term decline. There have been no confirmed negative signals so far.
Concluding, the S&P 500 index will likely open lower today. We may see some profit-taking action and a consolidation along the 2,800 mark. There are still short-term technical overbought conditions.
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
