Briefly:

Intraday trade: Our Thursday's intraday outlook was neutral. The S&P 500 index lost 0.1% after opening 0.1% lower. So, our intraday outlook proved accurate again. The stock market will probably extend its short-term consolidation today. We prefer to be out of the market, avoiding low risk/reward ratio trades.

Medium-term trade: In our opinion, no medium-term positions are justified.

Our intraday outlook is neutral. Our short-term outlook is neutral, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes lost 0.1-0.2% on Thursday, extending their short-term consolidation, as investors continued to take profits off the table following early May rally. The S&P 500 index remains close to 2,700 mark, after bouncing off resistance level at around 2,750. It currently trades 5.4% below January 26 record high of 2,872.87. Both, Dow Jones Industrial Average and the technology Nasdaq Composite lost 0.2% yesterday.

The nearest important level of resistance of the S&P 500 index remains at around 2,720-2,725, marked by Tuesday's daily gap down of 2,718.59-2,725.47, among others. The next resistance level remains at 2,740-2,750, marked by mid-March local high. On the other hand, support level is at around 2,700-2,710, marked by last Thursday's daily gap up of 2,701.27-2,704.54 and yesterday's daily low. The support level is also at 2,680-2,685, marked by previous resistance level.

The broad stock market extended its short-term uptrend recently, as the S&P 500 index broke above the level of 2,700 again. Stocks lost some ground on Tuesday, but it didn't look like a new downtrend. Since then, the market trades within a consolidation. So, will the run-up continue towards 2,800? There are still two possible medium-term scenarios - bearish that will lead us below February low following trend line breakdown, and the bullish one in a form of medium-term double top pattern or breakout towards 3,000 mark. There is also a chance that the market will just go sideways for some time, and that would be positive for bulls in the long run (some kind of an extended flat correction):

Positive Expectations, but Far From Breakout

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.2-0.3% higher vs. their Thursday's closing prices. The European stock market indexes have been mixed so far. There will be no new important economic data announcements today. We will likely see some more short-term uncertainty ahead of the weekend. The broad stock market may extend its fluctuations. For now, it looks like a relatively flat correction within an uptrend. However, if the S&P 500 index breaks below 2,700 mark, we could see more selling pressure.

The S&P 500 futures contract trades within an intraday consolidation, as it extends its overnight fluctuations after rebounding off support level of around 2,700-2,710 yesterday. The nearest important level of resistance is at around 2,725-2,730, marked by short-term local highs. The resistance level is also at 2,740. On the other hand, support level is at 2,715-2,720, among others. The futures contract trades above its short-term upward trend line, as we can see on the 15-minute chart:

Nasdaq Remains Above 6,900

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market fluctuates after bouncing off 7,000 mark on Monday. It retraced some of its recent run-up on Tuesday, but it got closer to 7,000 level again, before going back below 6,900. Is this just downward correction or a topping pattern ahead of downward reversal? It's hard to say. However, tech stocks remain relatively close to their all-time highs. The nearest important support level of the Nasdaq 100 futures contract remains at around 6,900, and the next support level is at 6,850-6,870, marked by local lows. On the other hand, resistance level is at 6,940-6,960, among others. The Nasdaq futures contract trades within a short-term consolidation, as the 15-minute chart shows:

Apple, Amazon - No Clear Short-Term Direction

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached new record high a week ago on Friday, as it extended its short-term uptrend. Then the price bounced off resistance level of around $190-200. Since then, it trades within a consolidation. Is this a topping pattern? There have been no confirmed negative signals so far:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. The price reached new record high in late April, as investors reacted to better-than-expected quarterly earnings release. Then, on the same trading day it sold off below $1,600. Was this a downward reversal or just correction following breakout higher? The recent price action looked pretty bullish, as price got back to the all-time high level. However, the stock retraced some of its recent advance on Tuesday. We may see some more short-term uncertainty following late April rally:

Dow Jones Also Going Sideways

The Dow Jones Industrial Average broke above its medium-term downward trend line recently. Then it continued higher above a few-week-long downward trend line. The blue-chip index bounced off resistance level of 25,000 on Monday, and then it retraced some of its recent advance on Tuesday. Since then, it continues to fluctuate relatively close to resistance level. Topping pattern or just flat correction? It looks like a correction:

The broad stock market reached the highest since March 21 on Monday, following S&P 500 index breakout above 2,700 mark, but it retraced some of its recent advance on the next day. Then it came back slightly higher. Is this a new downtrend or just downward correction? For now, it looks like a correction within an uptrend. The market extends its medium-term fluctuations. Just like we wrote in our several Stocks Trading Alerts, the early February sell-off set the negative tone for weeks or months to come.

Concluding, the S&P 500 index will probably extend its fluctuations today, as investors continue to worry about rising bond yields. For now, it looks like some relatively flat correction within an uptrend, but if the index breaks below 2,700 mark, we may see some selling pressure and a downward correction.

Currently, we prefer to be out of the market, avoiding low risk/reward ratio medium-term trades. We will let you know when we think it is safe to get back in the market.

To summarize: no medium-term positions are justified from the risk/reward perspective at this moment.

Intraday trade:

No intraday position is justified from the risk/reward perspective today.

No medium-term position is justified from the risk/reward perspective at this moment.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts