Briefly:

Intraday trade: Our Tuesday's intraday outlook was neutral. The S&P 500 index gained 1.1% after opening 0.6% higher. So, basically it was another relatively neutral intraday trading action (+0.5% from the open to close). However, the market extended its short-term uptrend and broke above 2,700 mark. Investors may take some short-term profits off the table today. Therefore, 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 between 0.9% and 1.7% on Tuesday, retracing more of their March move down, as investors' sentiment improved following quarterly earnings releases, among others. The market shrugged off worries about Syrian conflict and trade war recently. The S&P 500 index is currently trading 5.8% below its January 26 record high of 2,872.87. The Dow Jones Industrial Average gained 0.9% and the technology Nasdaq Composite gained 1.7%, as it was relatively stronger than the broad stock market yesterday.

The nearest important level of resistance of the S&P 500 index is at around 2,740, marked by some March local highs and March 19 daily gap down of 2,741.38-2,749.97. The resistance level is also at 2,760-2,765. On the other hand, the nearest important support level is now at 2,700, marked by previous level of resistance. The support level is also at 2,685-2,695, marked by yesterday's daily gap up of 2,686.49-2,692.05.

Stocks are in the middle of their over two-month-long consolidation following early February sell-off. The market bounced off its year-long medium-term upward trend line few weeks ago. Is this a bottoming pattern before another leg higher within the long-term bull market? Or just pause before another wave of selling? So, there are still two possible future 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. But for now, the S&P 500 index gets closer to its mid-March consolidation below the level of 2,750. We may see some selling pressure there:

Positive Expectations Again

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.2-0.3% higher vs. their Tuesday's closing prices. Investors' sentiment improved following quarterly earnings releases. The European stock market indexes have been mixed so far. Will stocks extend their gains after higher opening at 9:30 a.m.? The bulls are on the run following yesterday's rally, but we may see profit taking action at some point. Investors will wait for the Beige Book release at 2:00 p.m. They will also wait for more quarterly earnings releases.

The S&P 500 futures contract trades within an intraday consolidation following yesterday's rally. For now, it looks like a flat correction within a short-term uptrend. Potential resistance level is at around 2,725, marked by previous local high, among others. On the other hand, support level is now at 2,700-2,705, marked by recent level of resistance. The next level of support is at 2,690. The futures contract trades within a consolidation above the level of 2,700:

Nasdaq Leads Higher

The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates following yesterday's advance. The market rallied after Monday's earnings release from Netflix. Tech stocks gauge reached new local high this morning, as it broke slightly above the level of 6.850. The nearest important level of support is at 6,800-6,820, and the next support level is at 6,750, among others. The Nasdaq futures contract trades close to its two-day-long upward trend line, as we can see on the 15-minute chart:

Big Cap Tech Stocks Rally Ahead of Earnings

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It broke above the resistance level of $175 on Monday, and it accelerated higher yesterday. Just like we wrote in our previous alerts; "If the market breaks higher, it could retrace more of March sell-off and get close to record high again", the stock got closer to its record high. There is a potential level of resistance at $180-$183.5. Apple will release its earnings report on May 1 and we may see some kind of "buy the rumor, sell the news" action. However, there are still medium-term negative technical divergences:

Now let's take a look at Amazon.com, Inc. (AMZN) daily chart. It was relatively strong yesterday, as it broke above its short-term consolidation and continued above the price of $1,500. Will it reach its March record high again? Amazon will release its earnings report on April 26, and just like in case of Apple, we may see "buy the rumor, sell the news" action. Potential level of resistance is now at around $1,550:

Blue-Chips Breaking Higher

The Dow Jones Industrial Average broke above its medium-term downward trend line, and it got closer to 25,000 mark again. Yesterday we wrote that it was a possible short-term scenario. And it came true. What's next? We may see some uncertainty closer to the above-mentioned 25,000 resistance level. On the other hand, support level is now at around 24,500, marked by the trend line:

The early March rally failed to continue following monetary policy tightening, trade war fears, among others. What was just profit-taking action, quickly became a meaningful downtrend. Breakdown below over-month-long rising wedge pattern made medium-term bearish case more likely, and after some quick consolidation, the index accelerated towards its early February low. 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. However, recent fluctuations were a bottoming pattern before upward reversal. It looks like Monday's breakout confirmed change of trend.

Concluding, the S&P 500 index will probably open slightly higher today, but we may see some profit taking action later in the day. The market is likely to fluctuate along the level of 2,700-2,750. Quarterly corporate earnings releases outweigh trade war fears, Syrian conflict escalation worries at this moment.

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