Briefly:
Intraday trade: The S&P 500 index lost 1.7% after opening 0.7% lower. The broad stock market will likely open lower again today. Then we may see a bounce off the support level or some short-term fluctuations along the local lows.
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 U.S. stock market indexes lost 1.7-2.0% on Tuesday, breaking below their recent trading range, as investors' sentiment worsened following the renewed trade war fears. The S&P 500 index retraced its April's advance. It currently trades 2.4% below its May the 1st record high of 2,954.13. The Dow Jones Industrial Average lost 1.8% and the Nasdaq Composite lost 1.9% on Tuesday.
The nearest important resistance level of the S&P 500 index is now at 2,890-2,900, marked by the recent support level. The resistance level is also at 2,920. On the other hand, the support level is now at 2,860. The support level is also at around 2,835-2,850, marked by April the 1st daily gap up of 2,836.03-2,848.63.
The broad stock market retraced all of its December sell-off and it broke above the last year's high recently. But yesterday the index broke below the short-term consolidation and it retraced all of the April's advance. The market also broke below its two-month-long upward trend line, as we can see on the daily chart:
Negative Expectations Again
Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.5-0.7% below their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for the Crude Oil Inventories number release at 10:30 a.m. The broad stock market will likely get back to its yesterday's local low. For now, it looks like a downward correction. The index broke below the support level of around 2,890-2,900 yesterday, and then we saw more selling pressure. Will the market break below the relatively important support level of 2,850? There have been no confirmed positive signals so far.
The S&P 500 futures contract trades within an intraday downtrend, as it retraces its yesterday's late-session advance. The nearest important level of resistance is at around 2,890-2,900. On the other hand, the support level is at 2,850-2,860. The futures contract is below its Monday's overnight low, as the 15-minute chart shows:
Nasdaq Also Lower
The technology Nasdaq 100 futures contract follows a similar path, as it retraces its yesterday's intraday advance. The nearest important resistance level is at 7,700. On the other hand, the support level is at 7,550-7,600, among others. The Nasdaq futures contract is closer to the 7,600 mark again this morning, as we can see on the 15-minute chart:
Microsoft at the Trend Line
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock gained almost 5% a week ago on Wednesday, following its quarterly earnings release. The price got back above the broken medium-term upward trend line again. However, last week's Wednesday's intraday trading action was quite bearish. And on Monday the stock got back below the upward trend line. The resistance level remains at around $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 accelerated its uptrend recently, as it reached the new record high of $131.37. Investors reacted to a better-than-expected quarterly earnings release. But it looked like a blow-off topping pattern. And we wrote about some clear technical overbought conditions. Yesterday the stock broke slightly below its medium-term upward trend line:
Dow Jones Slightly Below 26,000 Mark
The Dow Jones Industrial Average was relatively weaker than the broad stock market recently. Yesterday the blue-chip stocks' gauge broke below its medium-term upward trend line. The resistance level remains at around 26,800-27,000, marked by the last year's topping pattern and the record high of 26,951.8:
The S&P 500 index has reached the new record high last week after breaking above the recent local highs. The broad stock market extended its medium-term uptrend, as investors' sentiment remained very bullish following economic data, quarterly corporate earnings releases. However, yesterday it retraced its April's advance following the renewed trade war fears. We may see some more short-term volatility, as stocks trade closer to the medium-term support levels.
Concluding, the S&P 500 index will likely open lower again today. The market may come back to its local low following yesterday's late-session intraday advance. If the index breaks below 2,850, we could see more selling pressure.
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
