Briefly:

Intraday trade: Our Monday's intraday outlook was neutral. The S&P 500 index gained 0.4% after opening 0.2% higher. Overall, it was quite a neutral trading session. Today, the stock market will probably continue to fluctuate along the resistance level marked by previous local high. We may see some short-term profit-taking action. We prefer to be out of the market, avoiding low risk/reward ratio trades.

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

Our intraday outlook is neutral. 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 indexes gained 0.4-0.8% on Monday, extending their Friday's move up, as investors' sentiment remained bullish following last week's quarterly earnings, monthly employment data releases. The S&P 500 index got closer to its last week's Monday's local high, and it currently trades 6.9% below January 26 record high of 2,872.87. The Dow Jones Industrial Average gained 0.4%, and the technology Nasdaq Composite gained 0.8% yesterday.

The nearest important level of resistance of the S&P 500 index is at around 2,685, marked by previous local high. The next resistance level is at 2,695-2,710, marked by March 22 daily gap down of 2,695.68-2,709.79. On the other hand, support level is at 2,660-2,665, and the next level of support is at 2,635-2,640, among others.

The broad stock market continues its medium-term consolidation following late January - early February sell-off. There are still two possible medium-term scenarios - bearish that will lead us below February low following trend line breakdown, and the bullish one in a form of medium-term double top pattern or breakout towards 3,000 mark. There is also a chance that the market will just go sideways for some time, and that would be positive for bulls in the long run (some kind of an extended flat correction):

Negative Expectations, Just Correction?

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.3% lower vs. their yesterday's closing prices. The European stock market indexes have lost 0.1-0.6% so far. There will be no new important economic data announcements, but investors will wait for more quarterly earnings releases. We may see some short-term profit-taking action today. The market will likely correct some of its recent advance. For now, it doesn't look like a downward reversal.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of its recent move up. The nearest important level of resistance remains at around 2,670-2,680, marked by short-term local highs. On the other hand, support level is at 2,650-2,660, marked by recent resistance level. The next support level is at 2,620-2,630. The futures contract bounced off its previous local high, as the 15-minute chart shows:

Nasdaq at 6,800 Mark

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend after yesterday's advance. The market fell closer to 6,500 mark on Thursday, but it quickly came back above the level of 6,600 and then it continued much higher on Friday. It got closer to 6,850 mark yesterday. Yesterday, we wrote that "We may see some more uncertainty, as it gets closer to its April local high above the level of 6850". And there it is. The nearest important resistance level is at 6,850-6,850. On the other hand, support level is at 6,750-6,800, among others. The Nasdaq futures contract trades within a short-term consolidation along recent local highs, as we can see on the 15-minute chart:

Apple at New Record High, Amazon Bounces

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It was gaining ahead of last week's Tuesday's quarterly earnings releases, and it rallied after the fact.  On Tuesday we wrote, that "we will likely see a more clear reaction. Probably to the upside, as there seems to be some "sell the rumor, buy the fact" action going on". And we were right! The stock reached new record high yesterday. It seems that we may see some fluctuations along the price of $185:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. The price reached new record high more than a week ago on Friday, as investors reacted to better-than-expected quarterly earnings release. Then, on the same day it sold off below $1,600. Is this a downward reversal or just correction following breakout higher? If the price breaks below support level of around $1,550, we could see more selling pressure. But for now, it remains above a positive triangle continuation pattern:

Dow Jones Still Above 24,000 Mark

The Dow Jones Industrial Average has managed to break above its medium-term downward trend line again. The blue-chip index extends its consolidation below the resistance level of around 24,800-25,000. Will it resume its uptrend after a downward correction? The support level remains at around 23,800-24,000. We can see a few-week-long downward trend line. The index broke higher, so it may continue towards the above-mentioned 25,000 mark:

The broad stock market extends its medium-term consolidation following the early February sell-off. Just like we wrote in our several Stocks Trading Alerts, the early February sell-off set the negative tone for weeks or months to come. Stocks rallied on better-than-expected big cap tech companies' earnings releases recently, but they came back lower after Wednesday's FOMC Statement release. They resumed their uptrend on Friday, following monthly jobs data release, Apple's stock price rally. The market continued higher yesterday, but we may see some short-term uncertainty. It still looks like a flat correction within a medium-term downtrend.

Concluding, the S&P 500 index will probably retrace some of its recent rally today. For now, it looks like a downward correction within an uptrend. There are some close resistance levels ahead. Overall, 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.

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

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts