Briefly:

Intraday trade: The S&P 500 index lost 0.2% on Tuesday, after opening 0.1% higher. The broad stock market will probably open slightly lower today. We may see some more short-term fluctuations following the recent sell-off.

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 -0.4% and 0.0% on Tuesday, as investors hesitated after the recent sell-off following bouncing off the resistance levels on Thursday - Friday. The S&P 500 index broke below 2,750 on Monday. The index was 11.5% below September the 21st record high of 2,940.91 two weeks ago. And now it trades 7.5% below the all-time high. The Dow Jones Industrial Average lost 0.4% and the Nasdaq Composite was unchanged on Tuesday.

The nearest important level of resistance of the S&P 500 index remains at around 2,755-2,775, marked by the recent support level. The next resistance level is at 2,795-2,800, marked by Friday's daily gap down of 2,794.10-2,794.99, among others. The resistance level is also at 2,815-2,820, marked by mid-October local high of 2,816.94. On the other hand, the support level is at 2,700-2,720, marked by the previous short-term consolidation. The support level is also at 2,685, marked by the late October daily gap up.

The broad stock market extended its downtrend around two weeks ago, as the S&P 500 index fell closer to 2,600 mark. Then it bounced sharply and accelerated higher. On Wednesday we wrote that if the index breaks above 2,750, we could see more buying pressure. And the market got back above the broken long-term upward trend line. It was also back above 2,800 mark again. Then the index bounced off its mid-October local high and quickly reversed the uptrend. It sold off on Monday, as big cap tech stocks led the way lower:

Negative Expectations

Expectations before the opening of today's trading session are negative, because the index futures contracts trade between -0.2% and -0.5% vs. their yesterday's closing prices. The European stock market indexes have lost 0.1-0.6% so far. Investors will wait for the Consumer Price Index release at 8:30 a.m. The broad stock market will likely extend its short-term fluctuations following Monday's sell-off. We may see another attempt at bouncing towards 2,800 mark. However, there have been no confirmed short-term positive signals so far.

The S&P 500 futures contract trades within an intraday consolidation, as it extends its yesterday's fluctuations. The nearest important level of support is at around 2,700-2,710, marked by the short-term local low. On the other hand, the resistance level is at 2,745-2,755, among others. The futures contract is below its short-term downward trend line, as the 15-minute chart shows:

Nasdaq Remains Close to 6,800

The technology Nasdaq 100 futures contract follows a similar path, as it continues to fluctuate within a short-term consolidation after selling off on Monday. The market accelerated the short-term downtrend after breaking below 7,000 mark. The nearest important support level is at 6,780-6,800. On the other hand, the resistance level is now at 6,900-6,950. The Nasdaq futures contract trades along 6,800 this morning, as we can see on the 15-minute chart:

Big Cap Tech Stocks Fluctuate After Their Sell-Off

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It accelerated its downtrend on Monday following breaking down below the support level of around $200. It was relatively weaker than the broad stock market recently, as investors continued to react to the quarterly earnings release. The stock fell the lowest since the late July. The next important level of support is at $185-190. We may see an attempt at bouncing off that support level:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its sell-off following quarterly earnings release in the late October. The stock continued lower, but then it bounced off the support level of $1,500. The price reached a potential resistance level of around $1,750-1,800 before reversing lower. On Monday, the stock retraced some more of its recent advance. For now, it looks like a downward correction:

Dow Jones' Short-Term Consolidation

The Dow Jones Industrial Average fell below its last Wednesday's daily gap up, following the broad stock market's sell-off. Recently it accelerated above 26,000 mark and got closer to the early October topping consolidation. Then the blue-chip stocks gauge retraced most of the rally. The nearest important level of resistance is now at 25,750-26,000, and the support level is at 25,000-25,250:

Japanese Nikkei Follows U.S. Stocks

Let's take a look at the Japanese Nikkei 225 index now. It retraced more of its October sell-off recently, but then it failed to continue higher on Friday following bouncing off the resistance level at 22,500. Then we saw more downward action. The Nikkei continues to trade below its broken long-term upward trend line. It is at the October the 25th daily gap down:

The S&P 500 index retraced its last week's rally following breaking below the support level of 2,750 on Monday. Is this a new downtrend or just quick downward correction? The market may continue to fluctuate within a volatile month-long consolidation after the early October sell-off. The broad stock market index is at its long-term upward trend line again.

Concluding, the S&P 500 index will probably open slightly lower today, as investors hesitate following Monday's sell-off. For now it looks like consolidation within a downtrend. We may see some more short-term volatility.

Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
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