Briefly:

Intraday trade: The S&P 500 index lost 0.4% yesterday, after opening 0.2% higher. The broad stock market will probably open much lower today. We may see an attempt at breaking below the recent local lows. However, we could see an intraday bounce at some point.

Our speculative long position in the S&P 500 index has been closed because the market fell below the stop-loss level of 2,750 (S&P 500 index).

Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.

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

Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes were mixed between -0.5% and +0.3% on Monday, extending their short-term fluctuations, as investors continued to hesitate ahead of the quarterly corporate earnings releases, among other factors. The S&P 500 index is currently 6.3% below its September the 21st record high of 2,940.91. The Dow Jones Industrial Average lost 0.5% and the Nasdaq Composite gained 0.3% on Monday.

The nearest important level of resistance of the S&P 500 index remains at around 2,780-2,800, marked by the recent fluctuations. The next resistance level is at 2,825-2,830. On the other hand, the nearest important level of support is at 2,710-2,730, marked by October the 11th local low and the long-term trend line. The support level is also at 2,700.

The broad stock market continued retracing its medium-term advance recently, as it got closer to 2,700 mark. Then it retraced some of the short-term decline. On Tuesday a week ago the index broke above the resistance level of around 2,800. On Wednesday we saw a short-term consolidation. Then stocks sold off again on Thursday. Will the market resume its downtrend and break below the long-term trend line? The long-term upward trend line is slightly above 2,700 mark:

Very Negative Expectations

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 1.0-1.4% below their yesterday's closing prices. The European stock market indexes have lost 0.6-1.7% so far. Investors will wait for the Richmond Manufacturing Index announcement at 10:00 a.m. They will also wait for some quarterly earnings releases. The broad stock market will likely come back closer to the support level of its recent local low. For now, it still looks like a consolidation following the recent sell-off. If the S&P 500 breaks below the support level of 2,700, we could see more selling pressure.

The S&P 500 futures contract trades within an intraday downtrend, following a breakdown below the level of 2,750. The nearest important level of support is now at around 2,700-2,710. On the other hand, the level of resistance is at 2,740-2,750, among others. The futures contract trades below its recent local lows this morning, as the 15-minute chart shows:

Nasdaq Also Lower

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. The tech stocks' gauge gets back to 7,000 mark, following bouncing off the resistance level 7,300-7,350 last week. It fell over 800 points off its October the 1st record high above the level of 7,700 recently. We could see more short-term volatility. The nearest important level of resistance is now at around 7,100-7,150. On the other hand, the support level is at 6,900-7,000. The Nasdaq futures contract is below its few-day-long downward trend line, as we can see on the 15-minute chart:

Big Cap Tech Stocks Extend Their Consolidation

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached the new record high at the level of $233.47 in the early October, as it continued to act relatively strong. Then the stock retraced its rally. Apple trades within an almost two-month-long consolidation, and the support level remains at around $215:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It traded within a clear short-term downtrend following breaking down below its upward trend lines recently. Then it bounced off the support level of around  $1,700. Was it an upward reversal or just a correction within an uptrend? For now it looks like a correction:

Dow Jones Going Back To Recent Low?

The Dow Jones Industrial Average reached its new all-time high at the level of 26,951.81 on October the 3rd. Then the blue-chip stocks' gauge broke below its medium-term upward trend lines and the support level of around 26,000. And then it accelerated lower. On Friday a week ago the market bounced off the support level of around 25,000. The index continued upwards on last Tuesday, but then it bounced off the resistance level of 26,000:

The S&P 500 index sold off recently following breaking down below its early September local lows. The market sharply reversed its medium-term uptrend. It fell closer to 2,700 mark on Thursday more than a week ago. Since then it retraced some of the decline. Last Thursday's trading session has brought the medium-term sell-off fears again. For now, it looks like a consolidation following the last week's decline.

Concluding, the S&P 500 index will probably open much lower today. The market may get back close to its October the 11th local low and its long-term upward trend line. However, we may see more volatility ahead of some major quarterly corporate earnings releases.

Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
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