Briefly:

Intraday trade: The S&P 500 lost 0.9% on Thursday, after opening 0.5% lower. The market will probably open lower again today. Then we may see a consolidation along the short-term support level of 2,700.

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 0.9-1.2% on Thursday, as investors took short-term profits off the table following the recent advances. The S&P 500 index broke above its short-term consolidation on Wednesday a week ago and it continued higher. The market got above the 61.8% Fibonacci retracement of its October-December downward correction of 20.2% (2,713.88). It has gained 390 points from the late December medium-term low, but it is still around 235 points below the September 21st record high of 2,940.91. The Dow Jones Industrial Average lost 0.9% and the Nasdaq Composite lost 1.2% yesterday.

The nearest important resistance level of the S&P 500 index is now at 2,720-2,725, marked by yesterday's daily gap down of 2,719.32-2,724.15. The resistance level is also at 2,740, marked by the local high. On the other hand, the support level is at 2,700-2,710, marked by the previous resistance level. The support level is also at 2,650.

The broad stock market broke below its two-month-long trading range in the mid-December, as the S&P 500 index fell below the level of 2,600. Then the market accelerated lower and it broke below the 2,400 mark. Since then, it has retraced more than 61.8% of the whole decline off the September high. The index got closer to its October-November local highs and the resistance level of 2,800, 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 0.6-0.8% below their Thursday's closing prices. The European stock market indexes have lost 0.2-0.5% so far. There will be no new important economic data announcements today. The broad stock market will likely extend its short-term downward correction and then we may see some fluctuations along the support level.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces its overnight rebound. The nearest important resistance level is at around 2,700-2,705. On the other hand, the support level is at 2,680-2,685, among others. The futures contract is close to the short-term local low this morning, as the 15-minute chart shows:

Nasdaq Also Lower

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. The market gained over 1,200 points from December the 26th local low of around 5,820 in the recent weeks. And we saw some short-term technical overbought conditions this week. The nearest important resistance level is now at 6,900-6,950. The support level is at 6,800, marked by the previous local highs. The Nasdaq futures contract is below its two-day-long downward trend line, as we can see on the 15-minute chart:

Apple, Amazon - Going Sideways, Will They Reverse Downwards?

Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). Apple released its quarterly earnings last week. Then the stock broke above the recent trading range and the resistance level of $155-160. It retraced some more of its November-December sell-off. But yesterday it bounced off $175, retracing some of the recent advance. For now, it looks like a short-term downward correction:

Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The market broke above one of its three-month-long downward trend lines a month ago. Since then it has been going sideways. There is a resistance level at around $1,700-1,750. A week ago it bounced off that resistance level following quarterly earnings release:

Dow Jones Below the Resistance Level

The Dow Jones Industrial Average extended its short-term uptrend this week after breaking above its medium-term downward trend line. Will the blue-chip stocks' gauge continue higher and reach its record high again? Or reverse lower in the near term? There have been no confirmed negative signals so far. But there is a resistance level of around 25,000-26,000:

The S&P 500 index broke above its short-term consolidation a week ago on Wednesday, as investors reacted to the Fed's Rate Decision release. Is this a new medium-term uptrend or still just upward correction before another medium-term leg lower? The market continues to trade close to the 61.8% Fibonacci retracement of the whole medium-term decline. There have been no confirmed negative signals so far. But we still can see some short-term technical overbought conditions.

Concluding, the S&P 500 index will likely open lower today. We may see some more profit-taking action in the near term. However, there have been no confirmed negative signals so far. And for now, it looks like a downward correction.

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