Briefly:

Intraday trade: The S&P 500 index lost 0.1% after opening virtually flat again. Our yesterday's neutral intraday outlook proved accurate. The broad stock market will likely open lower today. We may see some more profit-taking action following the recent rally, but stocks could bounce off the support level. 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 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 were mixed between -0.3% and 0.0% on Thursday, as investors continued taking short-term profits off the table. The S&P 500 index extended its fluctuations along the level of 2,850. It currently trades just 0.7% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average lost 0.3% and the technology Nasdaq Composite was unchanged yesterday.

The nearest important level of support of the S&P 500 index remains at around 2,850, marked by the recent level of resistance. The next level of support is at 2,825-2,835, marked by the recent local lows. The support level is also at around 2,800. On the other hand, the nearest important level of resistance is at 2,870-2,875, marked by the mentioned January's all-time high. Potential level of resistance is also at 2,900.

The broad stock market got even closer to its January's record high recently, as investors' sentiment improved following quarterly corporate earnings, economic data releases. The S&P 500 index broke above the level of 2,850 on Tuesday following last week's Thursday's bounce off 2,800 mark. But it will probably retrace some of the recent rally today. It may get back below its late July local high of around 2,850. 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. The S&P 500 index still seems to be "climbing a wall of worries" here:

Negative Expectations

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.4-0.5% lower vs. their Thursday's closing prices. The main European stock market indexes have lost 0.6-1.6% so far. Investors will wait for the Consumer Price Index release at 8:30 a.m. The broad stock market will probably retrace some of its recent rally following bouncing off support level of around 2,800. For now it looks like a downward correction. The market remains below the resistance level of its late January' record high.

The S&P 500 futures contract trades within an intraday downtrend, as it extends its overnight decline. The nearest important level of support is now at 2,830-2,835, marked by some previous fluctuations. The next support level is at 2,825, among others. On the other hand, the level of resistance is at 2,845-2,850. The futures contract broke below its short-term upward trend line, as we can see on the 15-minute chart:

Nasdaq Also Lower, Just Correction?

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. The market bounced off the resistance level of around 7,500 yesterday. The nearest important level of resistance is now at 7,450, marked by the recent consolidation. The next resistance level is at 7,500-7,530, marked by the record high. On the other hand, support level is at 7,380-7,400. The Nasdaq futures contract is now below its recent trading range, as the 15-minute chart shows:

Big Cap Tech Stocks Reach New Records but Correction Looms

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock reached new record high yesterday at the level of $209.05, but we saw some profit-taking action before the session's close. It will likely retrace more of its recent rally today following the broad stock market weakness. There have been no confirmed negative signals so far. 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 reached yet another new record high yesterday at the level of $1,914.57 following the recent breakout above the price of $1,850. The nearest important level of resistance is at around $1,900-1,915. 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 Still Close to 25,500

The Dow Jones Industrial Average extended its short-term uptrend recently, as it broke above the local high of around 25,600. The nearest important level of resistance remains at around 25,800, marked by the late February local high. The blue-chip stocks' gauge is still relatively weaker than the broad stock market, as it trades well below the late January's record high of 26,616.71:

The S&P 500 index extended its short-term fluctuations yesterday, as it remained within a relatively narrow three-day-long trading range. It was a topping pattern, because the expectations before today's trading session are negative following global stock markets' decline. Investors fear a trade war, crisis in Turkey. For now, it looks like a downward correction.

Concluding, the broad stock market will likely open lower today. The S&P 500 index may retrace some of its recent advance and get closer to 2,800 again. There have been no confirmed medium-term negative signals so far.

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 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
Stock Trading Alerts