Briefly:

Intraday trade: Our Thursday's intraday outlook was neutral. The S&P 500 index gained 0.9% after opening 0.3% higher. The stock market may extend its uptrend today, but there are some close potential resistance levels. 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 main U.S. stock market indexes gained 0.8-0.9% on Thursday, extending their uptrend, as investors reacted to economic data releases, among others. The S&P 500 index broke above 2,700 mark and its mid-April local high, as it got closer to mid-March local highs. It is currently 5.2% below January 26 record high of 2,872.87. The Dow Jones Industrial Average gained 0.8%, and the technology Nasdaq Composite gained 0.9% yesterday.

The nearest important level of resistance of the S&P 500 index is at around 2,740, marked by mid-March local high. The next resistance level is at 2,780-2,800, marked by some previous local highs. On the other hand, support level is now at 2,700-2,705, marked by recent resistance level and yesterday's daily gap up of 2,701.27-2,704.54. The next level of support remains at 2,680-2,685, marked by previous local high.

The broad stock market extended its short-term uptrend this week, as the S&P 500 index broke above the level of 2,700 again. Will this 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):

Uptrend to Continue?

Expectations before the opening of today's trading session are slightly positive, because the index futures contracts trade 0.1-0.2% higher vs. their yesterday's closing prices. The European stock market indexes have lost 0.1-0.4% so far. Investors will wait for the Michigan Sentiment number release at 10:00 a.m. The broad stock market may extend its week-long uptrend today, but there are some short-term overbought conditions. There have been no confirmed negative signals so far.

The S&P 500 futures contract trades within an intraday consolidation, as it goes sideways following yesterday's move up. The nearest important level of support is at around 2,700-2,710, among others. On the other hand, resistance level is at 2,720-2,725. The futures contract continues to trade above its almost three-day-long upward trend line, as we can see on the 15-minute chart:

Nasdaq Closer to 7,000 Mark

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market fell closer to 6,500 mark on more than a week ago Thursday, and then it reversed its short-term downtrend and went much higher. It is trading closer to the level of 7,000 this morning, as it tests potential resistance level of 6,950-7,000. On the other hand, support level is now at 6,880-6,900, marked by recent level of resistance. The Nasdaq futures contract trades at new short-term high this morning, as the 15-minute chart shows:

Apple Rallies, Amazon Creeps Higher

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached new record high yesterday, following relatively flat Tuesday - Wednesday correction. The price gets closer to potential resistance level of around $190-200. There have been no confirmed negative signals so far. But will it continue even higher? There are some short-term technical overbought conditions:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. The price reached new record high in the 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 looks pretty bullish, as price gets back to the all-time high level:

Dow Jones Continues Higher

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. Yesterday we wrote that "It seems that the blue-chip index will test the resistance level of 25,000 again". Well, it looks more likely after yesterday's move up. On the other hand, support level remains at around 24,000:

The broad stock market is the highest since March 21, following the S&P 500 index breakout above 2,700 mark. It is still just medium-term consolidation following the early February sell-off, but bulls are much happier than a week ago. 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 recently, but they came back lower after last week's Wednesday's FOMC Statement release. They resumed their uptrend a week ago on Friday, following monthly jobs data release, Apple's stock price rally. The market continued higher this week, as it got closer to relatively important mid-March local highs (2,801.90 in case of S&P 500 index).

Concluding, the S&P 500 index will probably extend its short-term uptrend today, but we may see a selling pressure at some point, as there are technical overbought conditions. Investors will likely take profits off the table ahead of the weekend. 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.

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

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts