Briefly:

Intraday trade: The S&P 500 index lost 0.1% after opening 0.1% lower on Tuesday. The broad stock market will probably open virtually flat again today. We may see more short-term uncertainty following the recent decline. We prefer to be out of the market, avoiding low risk/reward ratio trades.

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

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 were mixed between -0.2% and 0.0% on Tuesday, extending their short-term consolidation, as investors hesitated following the recent decline. The S&P 500 index continued its short-term downtrend and it fell slightly below its late January local high of around 2,873 on Monday, before bouncing off that support level. The broad stock market's gauge is currently trading 2.0% below September the 21st record high of 2,940.91. The Dow Jones Industrial Average lost 0.2% and the Nasdaq Composite was unchanged yesterday.

The nearest important level of support of the S&P 500 index remains at around 2,870-2,875, marked by the mentioned late January local high. The next support level is at  2,850-2,855, among others. On the other hand, the resistance level is at 2,880-2,900, marked by the recent price action. The level of resistance is also at 2,915-2,920, marked by the Thursday's daily gap down of 2,919.78-2,921.36.

The broad stock market retraced its September's record breaking rally recently, as the S&P 500 index broke below its three-month long upward trend line. Is this a new downtrend or just some medium-term consolidation along the new record high? If the index remains above the late January local high, we could see more fluctuations:

Short-term Consolidation

Expectations before the opening of today's trading session are virtually flat, because the index futures contracts trade between -0.1% and 0.0% vs. their yesterday's closing prices. The European stock market indexes have lost 0.1-0.5% so far. Investors will wait for some economic data announcements today: Producer Price Index at 8:30 a.m., Wholesale Inventories at 10:00 a.m. The broad stock market will likely continue to fluctuate along the mentioned late January local high. We may see attempts at bouncing off that support level. But for now, it looks like a flat correction within a downtrend. If the index gets back above the level of 2,900, we could see more buying pressure.

The S&P 500 futures contract trades within an intraday consolidation, as it continues to fluctuate along the level of 2,885. The nearest important level of resistance is at around 2,890-2,900, marked by some recent local highs. On the other hand, the support level remains at 2,865-2,875, marked by short-term local lows. The futures contract trades above its recent short-term downward trend line, as we can see on the 15-minute chart:

Nasdaq Remains Close to 7,400

The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates along the level of 7,400. The tech stocks' gauge remains relatively weaker than the broad stock market. It broke below the level of 7,300 on Monday, as it fell the lowest since the late August. The nearest important support level is now at around 7,280-7,300, marked by the local low. On the other hand, the resistance level is now at 7,400-7,450, among others. The Nasdaq futures contract trades within a short-term consolidation, as the 15-minute chart shows:

Big Cap Tech Stocks' Bounce

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached the new record high at the level of $233.47 a week ago, as it continued to act relatively strong. Then the stock retraced most of its recent rally. Yesterday's trading session was pretty bullish, as the price bounced off the support level. There have been no confirmed negative signals so far. However, we still can see some negative technical divergences:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It is relatively weaker than the Apple stock, as it was trading within a clear short-term downtrend recently. The stock broke below its medium-term upward trend line on Friday. It continued below the recent local low of $1,865 on Monday. However, we can see an attempt at bouncing off that support level:

Dow Jones Going Sideways

The Dow Jones Industrial Average reached its new all-time high at the level of 26,951.81 on Wednesday a week ago. Since then it was trading downwards. The blue-chip stocks' gauge broke below the two-month-long upward trend line on Friday. But will it continue towards the medium-term upward trend line and the support level of around 26,000? The resistance level remains at 27,000. For now, it looks like a downward correction within an uptrend:

The S&P 500 index retraced its September advance recently, as investors' sentiment worsened following the bond yield's surge, among other factors. The broad stock market's gauge fell below its late January local high on Monday, before slightly bouncing off that support level. Will it remain above the medium-term support level or continue lower? If the index breaks below the level of 2,870, we could see more selling pressure.

Concluding, the S&P 500 index will probably open virtually flat today. We may see attempts at bouncing off the support level. But if the bulls fail, we may see more downward pressure at some point. There have been no confirmed short-term positive signals so far.

Intraday trade:

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

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

Thank you.

Paul Rejczak
Stock Trading Strategist
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