Briefly:

Intraday trade: Our yesterday's intraday trading outlook was bearish. It proved partly wrong because the S&P 500 index lost just 0.2% following slightly lower opening of the trading session. The index continued to trade within relatively narrow short-term consolidation. The market may retrace some of its recent rally today. Therefore, intraday short position is favored again. Stop-loss is at the level of 2,565 and potential profit target is at 2,530 (S&P 500 index).

Medium-term trade: In our opinion, no medium-term positions are justified.

Our intraday outlook is bearish today. Our short-term outlook is neutral, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes lost between 0.1% and 0.2% on Thursday, extending their short-term fluctuations along record highs, as investors awaited quarterly corporate earnings releases, among others. The S&P 500 index remained close to its Wednesday's new all-time high of 2,555.24. The Dow Jones Industrial Average reached new record high at the level of 22,884.82 yesterday, before closing slightly lower. The technology Nasdaq Composite also reached new all-time high at the level of 6613.50, before closing 0.2% lower. The nearest important level of support of the S&P 500 index remains at around 2,540, marked by recent fluctuations. The next support level is at 2,520-2,530, marked by last week's Monday's daily gap up of 2,519.44-2,520.40 and short-term local lows. The support level is also at 2,500-2,510, marked by previous level of resistance and local highs. On the other hand, resistance level is at 2,550-2,555, marked by the above-mentioned new all-time high. The S&P 500 index accelerated its uptrend recently. We still can see medium-term negative technical divergences along with technical overbought conditions. However, there have been no confirmed negative signals so far:

No Clear Short-Term Direction

Expectations before the opening of today's trading session are virtually flat again, with index futures currently between 0.0% and +0.1% vs. their yesterday's closing prices. The European stock market indexes have been mixed so far. Investors will now wait for series of economic data announcements: Consumer Price Index, Retail Sales at 8:30 a.m., Michigan Sentiment, Business Inventories at 10:00 a.m. The market expects that Consumer Price Index grew 0.6% in September (core number +0.2%), and Retail Sales grew 1.7% in September (core number +0.9%). Investors will also wait for more quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday consolidation, as it remains within its week-long consolidation. The nearest important resistance level is at around 2,550-2,555, marked by record high. On the other hand, level of support is at 2,540-2,545, marked by previous resistance level and some local lows. The next support level is at 2,530, marked by short-term consolidation. The support level is also at 2,520-2,525, marked by local lows. The futures contract continues to trade along the level of 2,550, as we can see on the 15-minute chart:

Nasdaq Still Close To Record High

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. It bounced off resistance level at around 6,100 yesterday. On the other hand, the nearest important support level is at around 6,065, marked by yesterday's local low. The next support level remains at around 6,040-6,050, marked by short-term local lows. The Nasdaq 100 futures contract is currently trading below its Tuesday-Thursday's upward trend line - new downtrend or just some flat correction?

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) again. It remains relatively weaker than record-breaking broad stock market indexes. The stock price bounced off support level at around $150 at the end of September. It retraced some of its early September decline. Is this a new uptrend or just upward correction? We can see some potential negative rising wedge - bear flag pattern. Will it break lower?

Now, let's take a look at Citigroup, Inc stock (C) daily chart (chart courtesy of http://stockcharts.com). The price broke below its over month-long upward trend line yesterday, following better-than-expected quarterly earnings release. Is this a new downtrend or just downward correction?

The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index trades along new record highs, as it gets closer to 23,000 mark. There have been no confirmed negative signals so far. However, we still can see some negative technical divergences. The price continues higher, while technical indicator like RSI (Relative Strength Index) forms a lower high or remains at the same level. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low. Bearish divergence is a moderately useful tool for detecting a coming reversal in the bullish trend, therefore it needs a confirmation. We can see relatively steep month-long upward trading channel or a negative rising wedge pattern. Is this a topping pattern?

Concluding, the S&P 500 index extended its short-term consolidation yesterday, as the broad stock market gauge continued to trade along Wednesday's new record high. Will uptrend continue? Or is this some topping pattern before downward correction? There have been no confirmed negative signals so far. However, we can see technical overbought conditions, along with bullish investors' sentiment. The broad stock market may retrace some of its recent advance at some point.

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:

S&P 500 index - short position: profit target level: 2,530; stop-loss level: 2,565,
S&P 500 futures contract (September) - short position: profit target level: 2,527; stop-loss level: 2,562
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $253; stop-loss level: $256.5

Medium-term trade:

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

Thank you.

Paul Rejczak
Stock Trading Strategist
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