Briefly:
Intraday trade: The S&P 500 lost 0.4% on Thursday, after opening 0.2% lower. The market will probably open higher today. We may see some more short-term fluctuations 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 main U.S. stock market indexes lost 0.4% on Thursday, as investors took some short-term profits off the table. The S&P 500 index retraced more of its October-December downward correction of 20.2% recently. It got closer to the previous local highs along the 2,800 level. Both the Dow Jones Industrial Average and the Nasdaq Composite lost 0.4% on Thursday.
The nearest important resistance level of the S&P 500 index remains at around 2,785-2,800, marked by the previous medium-term local highs. On the other hand, the support level is at around 2,760, marked by the last Friday's daily gap up of 2,757.90-2,760.24. The support level is also at 2,720, marked by the last Tuesday's daily gap up of 2,718.05-2,722.61.
The broad stock market retraced almost all of its December sell-off and it got closer 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:
Positive Expectations
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.5-0.6% higher vs. their Thursday's closing prices. The European stock market indexes gained 0.4-0.6% so far. There will be no new important economic data announcements today. The broad stock market will likely continue to fluctuate following its recent rally. We may see some more uncertainty, as the market remains close to the medium-term resistance level.
The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its yesterday's intraday decline. The nearest important level of resistance is at around 2,790-2,800, marked by the short-term local highs. On the other hand the support level is at 2,765-2,770, among others. The futures contract bounced off the short-term support level, as the 15-minute chart shows:
Nasdaq Also Higher This Morning
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market gained almost 1,300 points from December the 26th local low of around 5,820. The nearest important resistance level is now at 7,100-7,150. The support level is at 6,950-7,000, among others. The Nasdaq futures contract gets closer to the 7,100 mark again, as we can see on the 15-minute chart:
Big Cap Tech Stocks - More Fluctuations
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). Apple released its quarterly earnings recently. Then the stock broke above the recent trading range and the resistance level of $155-160. It retraced some more of its November-December sell-off. But then it bounced off $175, retracing some of the recent advance. It still looks like a relatively flat short-term correction:
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 Remains Close to Local High
The Dow Jones Industrial Average extended its short-term uptrend this week. The blue-chip stocks' gauge is now at the resistance level of 25,500-26,000. So will it continue 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 fluctuates following its recent run-up. It is now closer to 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 higher today. We may see some more consolidation following the recent rally. There are still some 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
