Briefly:
Intraday trade: The S&P 500 index lost 0.2% on Thursday, after opening 1.4% lower. The market will probably open slightly lower today. We may see some more short-term fluctuations.
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 were mixed between -0.3% and +0.4% on Thursday, following an intraday upward reversal, as investors' sentiment improved despite the renewed trade war fears. The S&P 500 index trades 8.5% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average lost 0.3% and the Nasdaq Composite gained 0.4% on Thursday.
The nearest important level of resistance of the S&P 500 index is now at around 2,695-2,700, marked by yesterday's daily gap down of 2,696.15-2,697.18. The resistance level is also at 2,720. On the other hand, the support level remains at 2,600-2,630, marked by the medium-term local lows.
The broad stock market quickly reversed its last week's upward course following the S&P 500 index' reversal off the resistance level at 2,800. Yesterday the market broke below 2,700 mark, as it retraced more of the rally. On Tuesday we wrote that it still looks like a two-month-long consolidation following the October rout. That statement remains relevant. The market is extending its medium-term consolidation, as we can see on the daily chart:
Consolidation Following Yesterday's Rebound
Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.6-0.8% below their Thursday's closing prices. The European stock market indexes have gained 0.5-1.2% so far. Investors will wait for some important economic data announcements today: Nonfarm Payrolls, Unemployment Rate at 8:30 a.m., Michigan Sentiment number, Wholesale Inventories at 10:00 a.m. The broad stock market will likely extend its short-term fluctuations today. The S&P 500 index bounced off the medium-term support level once again and it currently trades close to 2,700 mark. It still looks like a volatile medium-term consolidation following the October decline.
The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following yesterday's intraday rebound. The nearest important level of resistance is at around 2,690-2,700, marked by the local high. On the other hand, the support level is at 2,650-2,660, among others. The futures contract trades above its recent downward trend line, as the 15-minute chart shows:
Nasdaq Also Going Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates following yesterday's intraday advance. It broke below the level of 6,700 yesterday, before bouncing off more than 200 points. The nearest important level of resistance is at around 6,800-6,850. On the other hand, the support level is at 6,700-6,750. The Nasdaq futures contract is slightly below the level of 6,800, as we can see on the 15-minute chart:
Apple, Amazon Reversing Upwards?
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock got back to its support level of $170 yesterday. We can see an attempt at reversing the downtrend. However, there have been no confirmed positive signals so far:
Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It remains relatively stronger, as it still trades way above the November low. The stock bounced off $1,600 yesterday, and it is back at $1,700 again. The resistance level remains at $1,750-1,800, marked by some previous local highs:
Dow Jones Gets Back to 25,000
The Dow Jones Industrial Average broke above 25,000 mark last week, as it accelerated its short-term uptrend. The market continued towards the early November highs of 26,000-26,250. Then it quickly reversed lower on Tuesday. We saw more downward action yesterday, as the index fell to around 24,250, before bouncing off to 25,000 again:
The S&P 500 index quickly reversed its short-term uptrend on Tuesday following some negative U.S. - China trade war developments. It got back to 2,700 mark before the Wednesday's pause. Yesterday it continued towards the late October low of 2,603.54 before quickly bouncing off and retracing almost all of the daily decline. It still looks like a volatile medium-term consolidation.
Concluding, the S&P 500 index will likely open lower today. We may see some more short-term volatility, as investors await the monthly jobs data release.
Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.
Thank you.
Paul Rejczak
Stock Trading Strategist
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