Briefly:

Intraday trade: The S&P 500 gained 0.5% on Thursday, after opening 0.4% lower. The market will probably open slightly lower to virtually flat today. We may see a short-term downward correction.

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 0.4-0.5% on Thursday, extending their short-term uptrend again, as investors' sentiment remained bullish following last week's better-than-expected monthly jobs data release. The S&P 500 index continued its recent rebound off the December the 26th medium-term low of 2,346.58. It traded 20.2% below September the 21st record high of 2,940.91 on that day. Then the market rallied and retraced some of the downtrend. It got back above 2,500 mark on Friday and then it got very close to 2,600. The Dow Jones Industrial Average gained 0.5% and the Nasdaq Composite gained 0.4% yesterday.

The nearest important level of resistance of the S&P 500 index remains at 2,600, marked by the previous local lows. The resistance level is also at 2,635-2,640, marked by December the 14th daily gap down of 2,635.07-2,637.27. On the other hand, the level of support is at 2,550-2,570, and the next support level remains at 2,500, marked by some recent local highs.

The broad stock market broke below its two-month-long trading range in the mid-December, as the S&P 500 index fell below the level of 2,600. Then the market accelerated lower and it broke below the level of 2,400. The downward correction reached 20.2% from the September all-time high, surpassing January-February correction of around 12%. Is this a long-term bear market? It still looks like a medium-term downward correction, but the index remains slightly below the October-December consolidation, as we can see on the daily chart:

Mixed Expectations, Flat Correction?

The index futures trade 0.1-0.2% below their Thursday's closing prices. So expectations before the opening of today's trading session are slightly negative to virtually flat. The European stock market indexes have lost 0.1-0.3% so far. Investors will wait for the Consumer Price Index release at 8:30 a.m. The broad stock market may retrace some of its recent advance or it could fluctuate along the mentioned resistance level, marked by some previous medium-term local lows. Despite yesterday's gains, we saw some profit-taking action following the recent rally.

The S&P 500 futures contract trades within an intraday consolidation following yesterday's intraday advance. The nearest important level of support is now at around 2,560-2,580, marked by some recent fluctuations. On the other hand, the resistance level is at 2,600. The futures contract extends its short-term consolidation, as the 15-minute chart shows:

Nasdaq Remains Close to 6,600

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. It broke above the level of 6,600 on Tuesday, but then it failed to continue higher and it is still below the short-term resistance level of 6,640. It gained more than 800 points from December the 26th local low of around 5,820 and we can see some technical overbought conditions. The Nasdaq futures contract continues to trade along 6,600 mark, as we can see on the 15-minute chart:

Big Cap Tech Stocks - Mixed Picture, Which Direction is Next?

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock sold off on Thursday more than a week ago, as it reached the new medium-term low of $142. We saw clear short-term oversold conditions and then the stock retraced some of its recent decline. It broke above the month-long downward trend line this, but now it remains below the resistance level of $155-160:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. The stock accelerated its downtrend in the late December and it reached the new medium-term low of $1,307. Since then it was consequently advancing. On Tuesday the market reached its three-month-long downward trend line. We may see an attempt at breaking higher:

Dow Jones at Resistance Level

The Dow Jones Industrial Average broke below its two-month-long consolidation in the mid-December and then it accelerated much lower. The blue-chip stocks' gauge fell below the level of 22,000. It slightly extended the downtrend recently before sharply reversing higher and getting back to 24,000 mark. The market is now slightly below its October - December trading range after retracing most of its post-breakdown sell-off:

The S&P 500 index extended its downtrend in the late December, before reversing higher. The broad stock market was more than 20% below its September's record high on December the 26th. Is this a new long-term bear market or just medium-term downward correction? For now, it looks like a correction. However, there have been no confirmed medium-term positive signals so far. The market retraced some of its recent decline, but it continues to trade below the important resistance levels.

Concluding, the S&P 500 index will likely open virtually flat or slightly lower today. The market may retrace some of its short-term uptrend and we may see a profit-taking action.

Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts