Trading position (short-term; our opinion): Short position with the downside target of 2,840 (S&P 500 index) remains justified from the risk/reward perspective. However, the outlook may change if the index breaks above the resistance level of 2,980-3,000.
Intraday outlook: The broad stock market will likely open lower today. We may see some more profit-taking action following the recent advances.
The U.S. stock market indexes lost 0.4-0.8% on Monday, retracing some of their recent advance, as investors took short-term profits off the table. The S&P 500 index reached the new record high of 2,995.84 on Wednesday. The index gained almost 270 points from its early June local low of around 2,729. But yesterday it closed 20 points below the record high. The Dow Jones Industrial Average lost 0.4% and the Nasdaq Composite lost 0.8% on Monday.
The nearest important resistance level of the S&P 500 index remains at around 3,000. On the other hand, the support level is now at 2,975, marked by the Wednesday's daily gap up of 2,973.21-2,977.96. The support level is also at 2,945-2,955, marked by last Monday's daily gap up of 2,943.98-2,952.22.
The broad stock market broke above its short-term consolidation on Wednesday and it got very close to the 3,000 mark. Is this a real bullish breakout above the last year's September-October topping pattern? The market remains relatively close to the previous medium-term highs:
Negative Expectations Again
The index futures contracts trade 0.3-0.5% below their Monday's closing prices, so expectations before the opening of today's trading session are negative again. The European stock market indexes have been mixed so far. There will be no new important economic data announcements today. However, the market will wait for the Fed Chair Powell speech at 8:45 a.m.
The S&P 500 futures contract trades within an intraday consolidation following an overnight decline. The nearest important resistance level is at 2,980-2,985. On the other hand, the support level is at 2,960-2,965, among others. The futures contract is now below its week-long upward trend line, as the 15-minute chart shows:
Nasdaq Also Lower
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The nearest important resistance level is now at 7,800. On the other hand, the support level is at 7,700-7,750. The Nasdaq futures contract is slightly below the previous local lows this morning, as we can see on the 15-minute chart:
Apple, Microsoft - Mixed Picture
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke slightly above the resistance level of $200 a week ago. Then we saw a short-term consolidation, as the market fluctuated below the early May local highs. The resistance level remains at $210-215, and the support level is at $200:
Now let's take a look at the daily chart of Microsoft Corp. (MSFT). The stock reached the new record high of $138.40 recently, following breaking above the short-term consolidation. But then the price fell to its previous consolidation. Since then it trades along the high:
Dow Jones Remains Close to New Record High
The Dow Jones Industrial Average reached the new record high of 26,966.00 on Wednesday, as it broke slightly above its last year's topping pattern and the previous record high of 26,951.8. The marked remains close to the 27,000 mark. There have been no confirmed negative signals so far. However, we can see some short-term overbought conditions:
The S&P 500 index reached the new record high on Wednesday, as investors' sentiment improved ahead of Friday's monthly jobs data release and the long holiday weekend. Will the uptrend continue? We may see some more short-term uncertainty following the record-breaking advance. For now, it looks like another relatively flat correction within an uptrend.
Concluding, the S&P 500 index will likely open lower today. Then we may see more uncertainty following last week's Wednesday's rally.
Trading position (short-term; our opinion): Short position with the downside target of 2,840 (S&P 500 index) remains justified from the risk/reward perspective. However, the outlook may change if the index breaks above the resistance level of 2,980-3,000.
Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
