Briefly:

Intraday trade: Our Thursday's intraday outlook was neutral. The S&P 500 index gained 1.0% after opening 0.5% higher. Stocks will probably extend their short-term uptrend today, but we may see more uncertainty, as the index gets closer to resistance level. 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 gained 1.0-1.6% on Thursday, as investors' sentiment improved ahead of quarterly earnings releases, following bond yield drop. The S&P 500 index has retraced some more of its recent decline, and it currently trades 7.2% below its January 26 record high of 2,872.87. The Dow Jones Industrial Average gained 1.0% and the technology Nasdaq Composite gained 1.6% yesterday, as it was relatively stronger than the broad stock market.

The nearest important level of resistance of the S&P 500 index is now at 2,680-2,685, marked by previous local highs. The next resistance level is at 2,695-2,710, marked by March 22 daily gap down of 2,695.68-2,709.79. The resistance level is also at 2,740. On the other hand, support level is now at around 2,745-2,750, marked by yesterday's daily gap up of 2,645.30-2,647.16. The level of support is also at 2,610-2,615, marked by recent local low.

The broad stock market bounced off its medium-term upward trend line again. Stocks extend their over two-month-long consolidation following early February sell-off. Is this a bottoming pattern before another leg higher within the long-term bull market? Or just pause before another wave of selling? So, there are still two possible future 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:

Positive Expectations Despite Negative Changes

Expectations before the opening of today's trading session are positive following quarterly earnings releases. The index futures contracts trade between -0.4% and +0.1% vs. their yesterday's closing prices, however, big cap tech companies' earnings were released before futures' close. The main European stock market indexes have gained 0.2-0.7% so far. Investors will wait for some economic data announcements: Advance GDP number at 8:30 a.m., Michigan Sentiment at 10:00 a.m. The S&P 500 index may get closer to 2,700 mark and the above-mentioned late March daily gap down resistance level. Will the market break higher? Probably not, because we may see some profits taking action ahead of the weekend.

Nasdaq Back Above 6,700

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation along new local highs. The market continues retracing its recent move down, as it is back above 6,700 mark again. The nearest important resistance level is at around 6,750. The next level of resistance is at 6,800. On the other hand, support level is at 6,650-6,700, among others. The Nasdaq futures contract trades above its short-term downward trend line, as we can see on the 15-minute chart:

Amazon Rallies, Apple Still Going Sideways

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It sold off on Friday, following Thursday's move down, and it broke below the support level of $165 on Tuesday. Apple will release its earnings report on May 1, so expectations before that release seem to be negative. Will we see some "sell the rumor, buy the fact" action? Potential support level is at around $160:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. The price broke above $1,600 yesterday after-hours following much better-than-expected quarterly earnings release. So, it may break above medium-term triangle pattern today. Potential resistance level is at around $1,615-1,620, marked by record high. On the other hand, support level remains at $1,500-1,550:

Dow Jones Still at Downward Trend Line

The Dow Jones Industrial Average continues to trade along its medium-term downward trend line following Tuesday's breakdown below that line. The price bounced off resistance level of around 24,800-25,000 over a week ago. Will it get back to its late March - early April lows again? If it breaks below the level of 24,000, it could continue lower. Potential support level is at around 23,500. The blue-chip stocks' gauge broke above the level of 24,000 again:

The broad stock market retraced most of its Tuesday's move down yesterday. The S&P 500 index continues to trade within an over two-month-long consolidation following January - February sell-off. 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. Stocks rallied on better-than-expected big cap tech companies' earnings releases, but will medium-term sentiment improve? It's hard to say. For now, it looks like a flat correction within a medium-term downtrend.

Concluding, the S&P 500 index will probably continue its short-term uptrend today after yesterday's after-hours' better-than-expected earnings releases. However, the market gets closer to potential resistance level of 2,700 and it may pause there again. We may also see some uncertainty ahead of the weekend.

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