Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Intraday outlook: The broad stock market will likely open slightly higher today. The S&P 500 index may extend its consolidation along the local highs. For now, it looks like a relatively flat correction within a short-term uptrend.
The U.S. stock market indexes were mixed between -0.4% and +0.2% on Thursday, extending their short-term consolidation, as investors hesitated following the recent rebound. The S&P 500 index fell over 200 points from its record high of 3,027.98 in early August. Then it retraced more than 120 points of that sell-off, before getting back to the low again last week. And now, it fluctuates along the local highs. The Dow Jones Industrial Average gained 0.2% and the Nasdaq Composite lost 0.4% on Thursday.
The nearest important resistance level of the S&P 500 index remains at around 2,940-2,950, marked by last week's local high. On the other hand, the support level is at 2,895-2,900, marked by Monday's daily gap up of 2,893.63-2,913.48. The support level is also at 2,865-2,870.
The broad stock market broke below its two-month-long upward trend line in early August, 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:
Resistance Level of 2,940
The index futures contracts trade 0.2-0.4% above their Thursday's closing prices. So expectations before the opening of today's trading session are slightly positive. The European stock market indexes have gained 0.3-0.7% so far. Investors will wait for the New Home Sales number release at 10:00 p.m. There will also be a speech from the Fed Chair Powell at 10:00 p.m.
The S&P 500 futures contract trades within an intraday consolidation. It has retraced some of its overnight advance this morning. The nearest important resistance level is at 2,930-2,940, marked by local highs. On the other hand, the support level is at 2,900-2,920. The futures contract keeps bouncing off the 2,940 mark, as we can see on the 15-minute chart:
Nasdaq 100 Keeps Going Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. It bounced off a support level of 7,350-7,400 last week. And the nearest important resistance level remains at around 7,750-7,800. The Nasdaq futures contract remains within a week-long consolidation, as the 15-minute chart shows:
Tech Stocks - No Clear Short-Term Direction
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke slightly above its last week's local high. It is at the resistance level of $210-215 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 at $140-145. It still looks like a consolidation within a medium-term uptrend:
Dow Jones at Previous Local Highs
The Dow Jones Industrial Average broke below its upward trend line in late July. Then it fell to around 25,500, before bouncing off the 200-day moving average. Last week the blue-chip stocks' gauge bounced off that support level again. We could see more short-term fluctuations following the mentioned late July - early August sell-off:
The S&P 500 index broke below the upward trend line in late July, as investors reacted to the Fed's Rate Decision release, among other factors. We saw technical overbought conditions along with negative technical divergences then. And the market declined following renewed trade war fears. Recently it was rebounding off the support level of around 2,800-2,820. Has the bottom been reached? For now, it looks like a consolidation following the decline.
Concluding, the S&P 500 index will likely open slightly higher today. The market may continue to fluctuate along its last week's local high. Investors will wait for the Fed Chair Powell speech at 10:00 a.m. today.
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
