Briefly:

Intraday trade: Our Friday's intraday trading outlook was neutral. It proved accurate, because the S&P 500 lost 0.05% following neutral opening of the trading session. The market continued to fluctuate within a short-term consolidation. We still can see medium-term technical overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market again, avoiding low risk/reward ratio trades.

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

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

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

The main U.S. stock market indexes were mixed between -0.3% and 0.0% on Tuesday, as investors hesitated following long holiday weekend. The S&P 500 index trades around 0.5% below last Monday's new all-time high of 2,694.97. The Dow Jones Industrial Average was virtually flat yesterday, and the technology Nasdaq Composite closed 0.3% lower. The nearest important level of support of the S&P 500 index remains at around 2,680, marked by last Monday's daily gap up of 2,679.63-2,685.92. The next support level is at 2,670, marked by recent consolidation. The level of support is also at 2,640-2,650, marked by the December 8 daily gap up of 2,640.99-2,644.10. On the other hand, the nearest important level of resistance is at 2,685, marked by local high. The next resistance level is at around 2,695-2,700, marked by new all-time high. There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:

No Clear Short-Term Direction

Expectations before the opening of today's trading session are slightly positive, with index futures currently up 0.1% vs. their Tuesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Consumer Confidence, Pending Home Sales at 10:00 a.m. The market expects that the Consumer Confidence number was at 128.2 in December. The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates slightly below the level of 2,690. The nearest important level of support is at around 2,680-2,685. On the other hand, resistance level is at 2,695-2,700, marked by record high. The futures contract trades within a short-term consolidation, as the 15-minute chart shows:

Nasdaq Relatively Weaker Again

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The market retraces some of its yesterday's move down. The nearest important level of support is at around 6,430-6,450, marked by local lows. On the other hand, resistance level is at 6,480-6,500, among others. The Nasdaq 100 futures contract trades slightly below its short-term downward trend line, as we can see on the 15-minute chart:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The price reached new record high on Monday last week, as it broke above $175 mark. However, it failed to continue that rally and fluctuated along the level of $175. Yesterday, the stock fell to support level of around $170, marked by the early November daily gap up. Will the sell-off continue today?

The Dow Jones Industrial Average daily chart shows that blue-chip index fluctuates following the early December up. We still can see negative technical divergences. The most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low. There is a potential two-month-long rising wedge pattern:

Concluding, the S&P 500 index lost 0.1% on Tuesday, as it continued to fluctuate following recent record-setting rally. Is this a topping pattern or just another relatively flat correction within an uptrend? We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far.

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:

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

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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