Briefly:

Intraday trade: The S&P 500 index lost 0.8% after opening 0.4% lower on Wednesday. The broad stock market will likely open higher today. We may see an upward correction following yesterday's decline. We prefer to be out of the market, avoiding low risk/reward ratio trades.

Trading position (short-term; our opinion): short positions in the S&P 500 Index (opened at the level of 2,810 on July the 30th) with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Our intraday outlook is neutral. Our short-term outlook is bearish, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes lost between 0.6% and 1.2% on Wednesday, extending their short-term downtrend, as investors' sentiment further worsened. The S&P 500 index got very close to the level of 2,800 before bouncing off that support level. It currently trades 1.9% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average lost 0.6% and the technology Nasdaq Composite lost 1.2% on Wednesday.

The nearest important level of support of the S&P 500 index is now at around 2,800-2,805, marked by the recent local lows. The next level of support is at 2,780-2,790, among others. On the other hand, the level of resistance is now at around 2,825, marked by the recent support level. The resistance level is also at 2,845-2,850, marked by last Friday's daily gap down of 2,842.20-2,851.98.

The broad stock market got close to its January's record high recently, as investors' sentiment improved following quarterly corporate earnings, economic data releases. The S&P 500 index traded within a relatively narrow trading range in the middle of the last week. Then it broke lower on Friday. Was it some medium-term downward reversal or just downward correction before another leg up? There are still two possible medium-term scenarios - bearish that will lead us towards the February low again, and the bullish one - breakout higher towards 3,000 mark. The latter one got very real recently. However, the S&P 500 index bounced off the resistance level marked by the January's record high last week:

New Uptrend or Just Upward Correction?

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.5-0.8% higher vs. their yesterday's closing prices. The European stock market indexes have gained 0.5-0.6% so far. Investors will wait for some economic data announcements today: Housing Starts, Building Permits, Philadelphia Fed Manufacturing Index, Initial Claims at 8:30 a.m. The broad stock market will probably open higher and retrace some of its yesterday's decline. For now, it looks like an upward correction or a consolidation. There may be some more short-term uncertainty following the recent rout.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces most of its Wednesday's intraday decline. The nearest important level of resistance is now at around 2,840-2,845, marked by the recent local highs. The resistance level is also at 2,850-2,855. On the other hand, the support level remains at 2,800-2,815. The futures contract trades closer to its recent local highs, as we can see on the 15-minute chart:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it retraces its recent sell-off, The market is back above 7,400 mark again. It is still relatively close to the record high of around 7,530. The nearest important level of resistance is at 7,450-7,470, marked by the local highs. On the other hand, the level of support is now at 7,300-7,350, among others. The Nasdaq futures contract trades within its short-term consolidation again, as the 15-minute chart shows:

Apple, Amazon Still Close to Their New Record Highs

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). Despite an overall broad stock market weakness it continues to trade along its Monday's new record high of $210.95. There have been no confirmed negative signals so far. However, we may see a downward correction at some point. The nearest important level of support is now at $190-200, marked by the previous resistance level:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It has reached the new record high also on Monday at the level of $1,925.00. The nearest important level of resistance remains at around $1,925. On the other hand, support level is at 1,850. The stock continues to trade above its medium-term upward trend line, as we can see on the daily chart:

Dow Jones Bounces Off 25,000

The Dow Jones Industrial Average retraced more of its recent advance on Wednesday, as it reached the support level of 25,000. The blue-chip stocks gauge bounced off that level, but there have been no confirmed positive signals so far. Is this just downward correction or a new downtrend? For now, it looks like a correction. However, if the DJIA breaks below 25,000 mark, we could see more selling pressure:

The S&P 500 index bounced off support level of around 2,800 yesterday. Was it an upward reversal or just upward correction before another leg lower? We may see some more short-term uncertainty, as investors react to global news releases. However, we still can see a pretty mild stock market reaction to the Turkey crisis, trade war fears.

Concluding, the broad stock market will likely open higher today. Then we may see some more short-term uncertainty following last week's Friday's decline. The S&P 500 index bounced off 2,800 mark yesterday. It could be a new uptrend, but there are some resistance levels ahead.

Intraday trade:

No intraday position is justified from the risk/reward perspective today.

Trading position (short-term; our opinion): short positions in the S&P 500 Index (opened at the level of 2,810 on July the 30th) with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
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