Trading position (short-term; our opinion): Short position with a stop-loss level at 3,100 and the downside target of 2,880 (S&P 500 index) is justified from the risk/reward perspective.
Intraday outlook: The broad stock market will likely open slightly higher today. We may see a short-term consolidation following the recent advances, as investors will await the Fed's Rate Decision release.
The U.S. stock market indexes lost 0.1-0.3% on Tuesday, as investors hesitated ahead of the coming economic data, earnings releases. The S&P 500 index reached the new record high of 3,027.98 on Friday. It gained around 300 points from its early June local low. The Dow Jones Industrial Average lost 0.1% and the Nasdaq Composite lost 0.2% on Tuesday.
The nearest important resistance level of the S&P 500 index remains at around 3,030, marked by the new record high. On the other hand, the support level is now at 3,000-3,010, marked by the short-term local lows. The support level is also at 2,975-2,980, marked by the mid-July local lows.
The broad stock market broke above its short-term consolidation recently and it broke above the 3,000 mark. Is this a real bullish breakout above the last year's September-October topping pattern? The S&P 500 index continues to trade close to the new all-time high:
Consolidation Ahead of Fed's Decision
The index futures contracts trade 0.1-0.3% above their Tuesday's closing prices, so expectations before the opening of today's trading session are slightly positive. The European stock market indexes have been mixed so far. Investors will wait for series economic data announcements: ADP Non-Farm Employment Change at 8:15 a.m., Chicago PMI at 9:45 a.m., Crude Oil Inventories at 10:30 a.m., Federal Funds Rate at 2:00 p.m.
The S&P 500 futures contract trades within an intraday consolidation following an overnight advance. The nearest important resistance level is at around 3,020. On the other hand, the support level is at 3,000-3,010, among others. The futures contract trades along the short-term upward trend line, as we can see on the 15-minute chart:
Nasdaq 100 Also Going Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation after retracing some of yesterday's decline. The resistance level is at around 8,000-8,050. On the other hand, the support level is at 7,950. The Nasdaq futures contract remains slightly below the 8,000 mark this morning, as the 15-minute chart shows:
Apple to Break Higher
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock continued to trade at the resistance level of $210-215 recently. It was the highest since the early May on Monday. But it will likely break higher following yesterday's quarterly earnings release. So the market may accelerate its uptrend off the two-month-long upward trend line. However, we could see a short-term topping pattern there:
Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock reached the new record high of $141.68 on Friday following the recent quarterly earnings release. Will the uptrend continue? There have been no confirmed negative signals so far. However, we can see some clear negative technical divergences:
Dow Jones at the Trend Line
The Dow Jones Industrial Average continues to trade within a short-term consolidation. It remains close to the record high of 27,398.68. However, the blue-chip stocks' gauge is relatively weaker than the broad stock market. For now, it looks like a flat correction within an uptrend:
The S&P 500 index reached the new record high on Friday as it traded 1% above the 3,000 mark. Will the uptrend continue? We can see some technical overbought conditions along with negative technical divergences.
Concluding, the S&P 500 index will likely open slightly higher today. The market will await today's Fed's Rate Decision release. Therefore we could see an increased volatility after 2:00 p.m.
Trading position (short-term; our opinion): Short position with a stop-loss level at 3,080 and the downside target of 2,900 (S&P 500 index) is justified from the risk/reward perspective.
Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
