Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Intraday outlook: The broad stock market will likely open virtually flat today. The S&P 500 index may fluctuate along its last week's local high. For now it looks like a consolidation following the recent sell-off.
The U.S. stock market indexes gained 1.0-1.4% on Monday, extending their Friday's advance, as investors' sentiment remained bullish following Thursday's rebound off support level. The S&P 500 index fell over 200 points from its record high of 3,027.98 recently. Then it retraced more than 120 points of that sell-off, before getting back to the low again on Thursday. The Dow Jones Industrial Average gained 1.0% and the Nasdaq Composite gained 1.4% yesterday.
The nearest important resistance level of the S&P 500 index is now at around 2,940-2,950, marked by last week's local high. On the other hand, the support level is at 2,895-2,915, marked by the yesterday's daily gap up of 2,893.63-2,913.48.
The broad stock market broke below its two-month-long upward trend line in early August, and then it quickly retraced most of the June-July advance. The S&P 500 index remains below the previous medium-term local highs. For now, it looks like a consolidation following the January-February advance. However, it could also play out as a long-term topping pattern ahead of a more meaningful downward correction:
Consolidation Following Rally
The index futures contracts trade 0.1% below their Monday's closing prices right now. So expectations before the opening of today's trading session are virtually flat. The European stock market indexes have been mixed so far. There will be new important economic data releases today.
The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following Friday's-Monday's rally. The nearest important resistance level is at 2,925-2,930, marked by the local highs. On the other hand, the support level is at 2,900-2,920. The futures contract remains below its last week's local highs, 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. It bounced off support level of 7,350-7,400 on Thursday. And the nearest important resistance level is now at 7,750. The Nasdaq futures contract is now below its short-term upward trend line, as the 15-minute chart shows:
Tech Stocks Closer to Local Highs
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock broke slightly above its last week's local high yesterday. It is at the resistance level of $210-215 again:
Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock remains below the broken upward trend line. The resistance level is still at $140-145. For now, it looks like a consolidation within a medium-term uptrend:
Dow Jones Above 26,000 Again
The Dow Jones Industrial Average broke below its upward trend line in late July. Then it fell to around 25,500, before bouncing off the 200-day moving average. Last week the blue-chip stocks' gauge got back lower and it broke slightly below that average. But then it bounced off that support level again. We could see more short-term fluctuations following the mentioned late July - early August sell-off:
The S&P 500 index broke below the upward trend line in late July, as investors reacted to the Fed's Rate Decision release, among other factors. We saw technical overbought conditions along with negative technical divergences then. And the market declined following renewed trade war fears. Recently it was rebounding off the support level of around 2,800-2,820. Has the bottom been reached? For now, it looks like a consolidation following the decline.
Concluding, the S&P 500 index will likely open virtually flat today. The market may fluctuate along its last week's local high. If the index breaks above that resistance level, we could see more buying pressure.
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
