Briefly:
Intraday trade: Our Wednesday's intraday trading outlook was bearish. It proved partly wrong because the S&P 500 index gained 0.1%, following higher opening of the trading session. The index traded within a relatively narrow intraday trading range once again. The market may retrace some of its recent rally. Therefore, intraday short position is favored. Stop-loss is at the level of 2,570 and potential profit target is at 2,530 (S&P 500 index).
Our intraday outlook is bearish today. Our short-term outlook is neutral, and our medium-term outlook is neutral:
Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral
The main U.S. stock market indexes were mixed between 0.0% and +0.7% on Wednesday, as they continued to fluctuate along new record highs following economic data, quarterly earnings releases. The S&P 500 index has reached yet another new record high at the level of 2,564.11. The Dow Jones Industrial Average reached new record high at the level of 23,172.93, as it gained 0.7%, following IBM's better-than-expected quarterly earnings release. The technology Nasdaq Composite reached new record high of 6635.52, around 3 points above its Monday's high. The nearest important level of support of the S&P 500 index remains at around 2,550, marked by previous resistance level. The next support level is at 2,540, marked by recent fluctuations. The support level is also at 2,520-2,530, marked by previous daily gap up of 2,519.44-2,520.40 and short-term local lows. On the other hand, resistance level is at around 2,560-2,565, marked by the above-mentioned new all-time high. The S&P 500 index extends its uptrend, as it slowly climbs higher. We still can see medium-term negative technical divergences along with technical overbought conditions. However, there have been no confirmed negative signals so far:
New Downtrend Or Just Correction?
Expectations before the opening of today's trading session are negative, with index futures currently between -0.5% and -0.7% vs. their Wednesday's closing prices. The European stock market indexes have lost 0.5-0.7% so far. Investors will wait for some economic data announcements: Initial Claims, Philadelphia Fed Index at 8:30 a.m., Leading Indicators number at 10:00 a.m. The market expects that the Philadelphia Fed Index was at 21.9 in October. Investors will also wait for more quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday downtrend, as it retraces its recent move up. The nearest important resistance level is at around 2,550-2,555, marked by previous support level. The next level of resistance is at 2,560-2,565, marked by record high. On the other hand, support level is at 2,540-2,545, marked by local lows, and the next level of support is at around 2,530, among others. The futures contract breaks below its recent upward trading channel, as we can see on the 15-minute chart:
Nasdaq Retraces Recent Rally
The technology Nasdaq 100 futures contract follows a similar path, as it trades much lower this morning after an overnight sell-off. The nearest important level of support is at around 6,040-6,050, marked by local lows. The next level of support is at around 6,000. On the other hand, resistance level is at 6,080-6,100, marked by recent support level. The next level of resistance is at 6,120-6,130, marked by record high. The Nasdaq 100 futures contract is now below its recent upward trend line, as the 15-minute chart shows:
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) again. It was relatively stronger than broad stock market indexes recently, as it retraced some of its early September decline. The stock price bounced off support level at around $150 at the end of September. However, the market reached resistance level of $160 and failed to continue higher. Is this a new uptrend or just upward correction?
The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index reaches new record highs, as it breaks sharply above 23,000 mark. There have been no confirmed negative signals so far. The price broke above an over month-long rising wedge pattern yesterday. Is this some blow-off top pattern?
Concluding, the S&P 500 index slightly extended its uptrend again, as it gained 0.1% and broke above Tuesday's record high. Will uptrend reverse following the expected lower opening today? Or is this just downward correction? There have been no confirmed negative signals so far. However, we can see technical overbought conditions, along with very bullish investors' sentiment. The broad stock market may retrace some of its recent advance at some point.
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Paul Rejczak
Stock Trading Strategist
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