Briefly:

Intraday trade: Our Monday's intraday trading outlook was neutral. It proved accurate because the S&P 500 index lost 0.04%, following neutral opening of the trading session. The market broke above its short-term consolidation last week. We still can see negative technical divergences along with medium-term overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market today, 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 were mixed between -0.2% and +0.1% on Monday, extending their short-term consolidation, as investors' sentiment remained bullish following quarterly earnings, economic data releases. The S&P 500 index has reached yet another new all-time high at the level of 2,606.41, before closing 0.04% lower. The Dow Jones Industrial Average reached new record high at the level of 23,638.92. It closed 0.1% higher yesterday. The technology Nasdaq Composite was relatively weaker than the broad stock market, as it lost 0.2%. However, it reached new record high of 6,897.43. The nearest important level of support of the S&P 500 index remains at around 2,590, marked by last Tuesday's daily gap up of 2,584.64-2,589.17. The next support level is at 2,570-2,575, marked by short-term local lows. The level of support is also at 2,555-2,560. On the other hand, resistance level is at 2,600-2,605, marked by new all-time high. Will the S&P 500 index continue higher? Or is this some topping pattern before medium-term downward correction? There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:

Slightly Positive Expectations

Expectations before the opening of today's trading session are slightly positive, with index futures currently up between +0.1% and +0.2% vs. their Monday's closing prices. The European stock market indexes have gained 0.2-0.4% so far. Investors will wait for some economic data announcements: Trade Balance, Wholesale Inventories at 8:30 a.m., Consumer Confidence at 10:00 a.m. The market expects that the Consumer Confidence number was at 123.9 in November. The S&P 500 futures contract trades within an intraday uptrend, as it retraces its yesterday's move down. The nearest important level of support remains at around 2,595, marked by short-term local lows. The next level of support is at 2,585-2,590, among others. On the other hand, level of resistance is at around 2,600-2,605. The futures contract trades at its recent upward trend line, as the 15-minute chart shows:

Nasdaq Still At Record High

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The nearest important level of support is at 6,390-6,400, marked by previous resistance level. On the other hand, potential resistance level is at 6,420-6,425, marked by new record high. The Nasdaq 100 futures contract remains close to record high, 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 November 8, as it extended its uptrend following better-than-expected quarterly earnings release. Then it remained within a short-term correction. Apple stock bounced off support level at around $170 and retraced most of its downward correction recently. However, it still continues to trade below its all-time high. Will it continue higher despite some negative technical divergences?

The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index retraced its early November downward correction and reached new record high yesterday. We can see some expanding triangle structure. Is this a topping pattern? 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:

Concluding, the S&P 500 index reached new record high yesterday, before closing virtually flat. The broad stock market continues to trade slightly above its month-long consolidation. Is this a medium-term topping pattern or just another flat correction of a bull market? 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.

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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