Briefly:
Intraday trade: The S&P 500 lost 0.1% on Monday, after opening 0.2% lower. The market will probably open slightly higher today. We may see some more short-term uncertainty following Friday's decline. The market may fluctuate along the support level of 2,800.
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 were mixed between -0.1% and +0.1% on Monday, as investors hesitated following Friday's decline. The S&P 500 index retraced more of its October-December downward correction of 20.2% recently. The broad stock market's gauge traded just around 3% below September the 21st record high of 2,940.91. But then it fell to the 2,800 mark again. The Dow Jones Industrial Average gained 0.1% and the Nasdaq Composite lost 0.1% on Monday.
The nearest important resistance level of the S&P 500 index remains at around 2,820, marked by the recent support level. The next resistance level is at 2,850-2,860, marked by the early October local lows. On the other hand, the support level is at 2,800, marked by the recent resistance level and the daily gap up of 2,798.32-2,799.78. The support level is also at 2,785, marked by the daily gap up of 2,784.00-2,786.73.
The broad stock market retraced all of its December sell-off and it broke above the medium-term resistance level of around 2,800-2,820, marked by the October-November local highs recently. So is it still just a correction or a new medium-term uptrend? The market broke above the 61.8% Fibonacci retracement of the 20% decline. And we may see an attempt at getting back to the record highs. But will the index continue much higher above the mentioned previous local highs? Friday's trading session cast some doubts on bulls' power. However, there have been no confirmed negative medium-term signals so far. The index bounced off the previously broken two-month-long upward trend line:
Short-Term Consolidation
Expectations before the opening of today's trading session are slightly positive, because the index futures contracts trade 0.2% above their Monday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements today: Building Permits, Housing Starts at 8:30 a.m., Consumer Confidence number, Richmond Manufacturing Index at 10:00 a.m. The broad stock market will likely extend its short-term consolidation following the Friday's sell-off. If the index breaks below the 2,800 mark, we could see more selling pressure.
The S&P 500 futures contract trades within an intraday consolidation following an overnight bounce. The nearest important resistance level is at around 2,820-2,830, marked by some short-term local highs. On the other hand, the support level is at 2,790-2,800, marked by the local lows. The futures contract extends its short-term fluctuations this morning, as we can see on the 15-minute chart:
Nasdaq Also Going Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market rallied more than 1,700 points from December the 26th local low of around 5,820. But then it fell more than 250 points from the Thursday's overnight local high. The nearest important resistance level is now at 7,400-7,450. On the other hand, the support level remains at 7,200-7,250, among others. The Nasdaq futures contract is at the late Friday's intraday consolidation, as the 15-minute chart shows:
Apple, Amazon - Downward Correction or Something More?
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The market broke above its recent local highs a week ago and then it continued above the $180 level. On Thursday and on Friday the stock accelerated the uptrend and it traded within a resistance level of $190-200. But then it reversed its upward course. For now, it looks like a correction following the recent advances:
Now let's take a look at the daily chart of Amazon.com, Inc. (AMZN). The price broke above the previous local high early last week and on Thursday it broke above the $1,800 level. However, Friday's trading session was bearish as the stock bounced off the resistance level. The nearest important support level is now at $1,700:
Dow Jones Fluctuates Along 25,500
The Dow Jones Industrial Average retraced some more of its early March decline last week, but on Friday it reversed lower. The resistance level remains at around 26,000. And the blue-chip stocks gauge continues to trade below the February local high. However, it is still above the important 25,000 mark:
The S&P 500 index extended its short-term uptrend last week, as it got the highest since October the 10th again. Then the market bounced off the previously broken two-month-long upward trend line and it fell almost 2% on Friday. Yesterday's trading session was pretty uneventful. So will stocks continue lower? For now, it looks like a relatively flat correction within a three-month-long uptrend.
Concluding, the S&P 500 index will likely open slightly higher today. We may see some more short-term uncertainty following last week's Thursday's rally and the Friday's sell-off.
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
