Briefly:

Intraday trade: Our Thursday's intraday trading outlook was neutral. It proved accurate, because the S&P 500 gained 0.2% following slightly higher opening of the trading session (+0.1%). The market fluctuates after its Friday-Monday rally. We still can see technical overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market again, 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 0.1-0.2% on Thursday, extending their fluctuations along new record highs, as investors hesitated following recent run-up. The S&P 500 index trades around 0.4% below its Monday's new all-time high of 2,694.97. The Dow Jones Industrial Average gained 0.2% yesterday, and the technology Nasdaq Composite closed 0.1% higher. The nearest important level of support of the S&P 500 index remains at around 2,680, marked by Monday's daily gap up of 2,679.63-2,685.92. The next support level is at 2,670, marked by recent consolidation. The level of support is also at 2,640-2,650, marked by the December 8 daily gap up of 2,640.99-2,644.10. On the other hand, resistance level is at around 2,695-2,700, marked by new all-time high. There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:

Mixed Expectations

Expectations before the opening of today's trading session are virtually flat, with index futures currently up 0.1% vs. yesterday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Durable Goods Orders, Personal Income, Personal Spending at 8:30 a.m., New Home Sales, Michigan Sentiment at 10:00 a.m. The market expects that Personal Income and Personal Spending grew 0.4-0.5% in November, and New Home Sales number was at 654,000 in November. The S&P 500 futures contract trades within an intraday consolidation, as it extends its short-term uncertainty. The nearest important level of support is now at around 2,680-2,685. On the other hand, resistance level is at 2,695-2,700, marked by record high. The futures contract trades within a week-long consolidation, as we can see on the 15-minute chart:

No Clear Short-Term Direction

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market extends its fluctuations along the level of 6,500. The nearest important level of support is at around 6,460-6,480, marked by recent local lows. On the other hand, resistance level is at 6,500-6,520. The Nasdaq 100 futures contract extends its short-term fluctuations along the level of 6,500, 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 Monday, as it broke above $175 mark. However, it failed to continue that rally. The nearest important support level remains at around $170, marked by the early November daily gap up. Will short-term uptrend continue? Or is this just over-month-long topping consolidation?

The Dow Jones Industrial Average daily chart shows that blue-chip index fluctuates following recent move up. 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. There is a potential two-month-long rising wedge pattern:

Concluding, the S&P 500 index gained 0.2% on Thursday, as it extended its short-term consolidation following recent record-setting rally. For now, it looks like a consolidation within an uptrend, and the broad stock market remains relatively close to record high. 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.

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

There will be no Stock Trading Alert on Tuesday, December 26. We apologize for inconvenience.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts