Briefly:

Intraday trade: Our Tuesday's intraday trading outlook was neutral. It proved wrong because the S&P 500 index gained 1.0%, following higher opening of the trading session. The market broke above its short-term consolidation. We still can see negative technical divergences along with medium-term overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market today, avoiding low risk/reward ratio trades.

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

Our intraday outlook is neutral today. 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 gained between 0.5% and 1.1%, extending their last week's advance, as investors' sentiment remained very bullish following economic data releases, among others. The S&P 500 index has reached new record high at the level of 2,627.69. The Dow Jones Industrial Average reached new record high at the level of 23,849.61, and the technology Nasdaq Composite was relatively weaker than the broad stock market, as it gained just 0.5%. However, it reached new record high of 6,914.19. The nearest important level of support of the S&P 500 index is now at 2,600-2,605, marked by recent resistance level. The next level of support remains at around 2,590, marked by last Tuesday's daily gap up of 2,584.64-2,589.17. The support level is also at 2,570-2,575, marked by short-term local lows. On the other hand, potential resistance level is at around 2,630, marked by new all-time high. Will the S&P 500 index continue higher? Or is this some topping pattern before medium-term downward correction? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:

Positive Expectations

Expectations before the opening of today's trading session are positive, with index futures currently up between +0.1% and +0.3% vs. their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: the U.S. GDP number at 8:30 a.m., Pending Home Sales at 10:00 a.m., Crude Oil Inventories at 10:30 a.m. The market expects that the GDP grew 3.3% last quarter. The S&P 500 futures contract trades within an intraday uptrend, as it extends its uptrend. The market reaches new record highs ahead of the opening of today's trading session. The nearest important level of support is at around 2,620-2,625, marked by recent fluctuations. The next support level is at 2,600-2,610, marked by previous level of resistance. The futures contract extends its short-term uptrend, as we can see on the 15-minute chart:

Nasdaq Relatively Weaker

The technology Nasdaq 100 futures contract is relatively weaker, as it remains close to recent record high. The nearest important level of resistance is at around 6,430. On the other hand, support level remains at 6,390-6,400, among others. The Nasdaq 100 futures contract continues to trade within a short-term consolidation along the level of 6,425, as the 15-minute chart shows:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The price reached new record high on November 8, as it extended its uptrend following better-than-expected quarterly earnings release. Since then it fluctuates slightly below its record high. The stock remains relatively weaker than the broad stock market. Is this a topping pattern or just consolidation before another leg up?

The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index broke above its recent consolidation and reached new record high yesterday. It has also broke above the expanding triangle pattern. Will it continue higher? Or is this some topping pattern? We still can see negative technical divergences. The most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low:

Concluding, the S&P 500 index extended its almost nine-year-long bull market yesterday, as it continued higher above 2,600 mark. The broad stock market broke above its month-long consolidation. We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far.

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.

Medium-term trade:

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

Thank you.

Paul Rejczak
Stock Trading Strategist
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