Briefly:

Intraday trade: Our Monday's intraday trading outlook was bearish. It proved wrong because the S&P 500 index gained 0.2%, following slightly higher opening of the trading session. The index traded within a relatively narrow intraday trading range. The market may retrace some of its recent rally. Therefore, intraday short position is favored again. Stop-loss is at the level of 2,570 and potential profit target is at 2,530 (S&P 500 index).

Medium-term trade: In our opinion, no medium-term positions are justified.

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

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

The U.S. stock market indexes gained between 0.2% and 0.4% on Monday, extending their uptrend, as investors' sentiment remained bullish. following recent advances, economic data, quarterly earnings releases. The S&P 500 index has reached yet another new record high at the level of 2,559.47, around 2 points above its Friday's high. The Dow Jones Industrial Average reached new record high at the level of 22,960.12, as it gained 0.4%. The technology Nasdaq Composite also reached new all-time high at the level of 6632.50. The nearest important level of support of the S&P 500 index is at around 2,550, marked by previous resistance level. The next support level is at 2,540, marked by recent fluctuations. The support level is also at 2,520-2,530, marked by previous daily gap up of 2,519.44-2,520.40 and short-term local lows. On the other hand, resistance level is at around 2,560, marked by the above-mentioned new all-time high. The S&P 500 index extends its uptrend, as it slowly climbs higher. We still can see medium-term negative technical divergences along with technical overbought conditions. However, there have been no confirmed negative signals so far:

Mixed Expectations

Expectations before the opening of today's trading session are virtually flat, with index futures currently between -0.05% and 0.0% vs. yesterday's closing prices. The European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: Industrial Production number, Capacity Utilization. The market expects that the U.S. Industrial Production grew 0.3% in September. Investors will also wait for more quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday consolidation, as it extends its recent fluctuations along new record highs. The nearest important resistance level is at around 2,555-2,560, marked by record high. On the other hand, the nearest important support level is at 2,550, marked by local lows. The next level of support is at 2,540-2,545, marked by previous resistance level and local lows. The futures contract trades along its upward trend line, as we can see on the 15-minute chart:

Nasdaq Relatively Stronger

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation along new record high. It broke above the resistance level of 6,100 yesterday. The nearest important support level is now at around 6,080-6,100, and the next support level remains at 6,040-6,060, marked by short-term consolidation. On the other hand, resistance level is at 6,120-6,130, among others. The Nasdaq 100 futures contract is trading along new record high, as the 15-minute chart shows:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) again. It was relatively stronger than broad stock market indexes yesterday, as it accelerated its short-term uptrend. The stock price bounced off support level at around $150 at the end of September. It retraced some more of its early September decline yesterday. Is this a new uptrend or just upward correction? The stock price remains above its upward trend line:

Now, let's take a look at one of so-called 'FAANG' stocks (Facebook, Amazon, Apple, Netflix, Google) - Netflix, Inc. stock (NFLX) daily chart (chart courtesy of http://stockcharts.com). The stock is expected to open higher today following yesterday's after-hours better-than-expected quarterly earnings release. There have been no confirmed negative signals so far. However, we can see some clear negative technical divergences. The price continues higher, while technical indicator like RSI (Relative Strength Index) forms a lower high or remains at the same level. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low. Bearish divergence is a moderately useful tool for detecting a coming reversal in the bullish trend, therefore it needs confirmation.

The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index reaches new record highs, as it gets closer to 23,000 mark. There have been no confirmed negative signals so far. We can see relatively steep month-long upward trading channel or a negative rising wedge pattern. Is this some medium-term topping pattern?

Concluding, the S&P 500 index slightly extended its uptrend on Monday again, as it gained 0.2% and broke slightly above its Friday's record high. Will uptrend continue even further? Or is this some topping pattern before downward correction? There have been no confirmed negative signals so far. However, we can see technical overbought conditions, along with very bullish investors' sentiment. The broad stock market may retrace some of its recent advance at some point.

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:

S&P 500 index - short position: profit target level: 2,530; stop-loss level: 2,570,
S&P 500 futures contract (September) - short position: profit target level: 2,527; stop-loss level: 2,567
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $253; stop-loss level: $257

Medium-term trade:

No medium-term position is justified from the risk/reward perspective at this moment.

Thank you.

Paul Rejczak
Stock Trading Strategist
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