Briefly:
Intraday trade: The S&P 500 index was virtually flat on Tuesday, after opening 1.0% higher. The market will probably open higher again today. We may see another attempt at getting back to 2,700 mark.
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 -0.2% and +0.2% on Tuesday, as investors hesitated following the recent volatility. On Monday the S&P 500 index fell the lowest since the early April, as it reached the daily low of 2,583.23. It traded 12.2% below September the 21st record high of 2,940.91. The index is currently 10.3% below the all-time high. The Dow Jones Industrial Average lost 0.2% and the Nasdaq Composite gained 0.2% on Tuesday.
The nearest important level of resistance of the S&P 500 index is at around 2,650-2,675, marked by the previous support level and yesterday's local high. The resistance level is also at 2,695-2,700, marked by last Thursday's daily gap down of 2,696.15-2,697.18. On the other hand, the support level remains at 2,580-2,600, marked by the medium-term local lows.
The broad stock market reversed its recent upward course following the S&P 500 index' reversal off the resistance level at 2,800. On Thursday the market broke below 2,700 mark, as it retraced more of the rally. On Monday it fell the lowest since the early April, before bouncing off and getting above 2,600 mark at the end of the day. Yesterday the market failed to continue above the level of 2,675. Consequently, it reversed lower. The index continues to trade above its previous medium-term lows, as we can see on the daily chart:
Positive Expectations Again
The index futures contracts trade 0.6-0.8% above their yesterday's closing prices. So expectations before the opening of today's trading session are positive. The main European stock market indexes have gained 1.1-1.6% so far. Investors will now wait for some economic data announcements: Consumer Price Index, Capacity Utilization Rate at 8:30 a.m., Crude Oil Inventories at 10:30 a.m. The broad stock market will likely extend its short-term fluctuations. We may see another attempt at breaking above the resistance level of around 2,675. It still looks like a volatile medium-term consolidation following the October decline despite Monday's sell-off below 2,600 mark.
The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its yesterday's downward reversal. The nearest important level of resistance is at around 2,675, marked by the local high. On the other hand, the support level is at 2,620. The futures contract trades along the level of 2,650, as the 15-minute chart shows:
Nasdaq Also Higher
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market fell closer to its late November lows on Monday. It was relatively stronger than the broad stock market, as it didn't reach a new medium-term low. Then the tech stocks' gauge gained almost 300 points. The nearest important resistance level remains at 6,800-6,850. On the other hand, the support level is at 6,650-6,700, among others. The Nasdaq futures contract continues to trade slightly below its short-term downward trend line, as we can see on the 15-minute chart:
Big Cap Tech Stocks - Uncertainty Following the Rebound
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock extended its sell-off on Monday, following Friday's breakdown below the price of $170. It reached the new medium-term low of $163.33. Then the market got back to $170. So was it a panic bottom before an upward reversal? There have been no confirmed positive signals so far. But we still can see technical oversold conditions:
Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It remains relatively stronger, as it still trades way above the November low. The stock bounced off $1,600 on Thursday, but it failed to continue higher on Friday. The resistance level remains at $1,750-1,800, marked by some previous local highs. The stock continues to trade slightly below its two-month-long downward trend line, as we can see on the daily chart:
Dow Jones Remains Close to Medium-Term Support Level
The Dow Jones Industrial Average got closer to 26,000 mark last week, as it accelerated its short-term uptrend, but then it quickly reversed lower. We saw more downward action on Thursday, as the index fell to around 24,250, before bouncing off to 25,000 again. On Friday, the blue-chip stocks' gauge fell closer to the support level again. And on Monday, it fell below 24,000 before bouncing off and closing virtually flat. It looks like a short-term upward reversal, but there have been no confirmed positive signals so far:
The S&P 500 index fell the lowest since the early April on Monday following last week's failed rally to 2,800 mark. It reversed its intraday downward course after bouncing off the support level of around 2,580-2,600. Will it continue higher? Or was it just an upward correction before another leg lower and a real breakdown below the medium-term local lows? There have been no confirmed positive signals so far. The broad stock market continues to trade within its two-month-long consolidation.
Concluding, the S&P 500 index will likely open higher today. We may see some more short-term volatility, as the market gets closer to the recent local highs.
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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