Briefly:

Intraday trade: The S&P 500 index lost 0.4% on Tuesday, after opening 0.8% lower. The stock market will likely open higher today, as investors' sentiment improves once again. We prefer to be out of the market, avoiding low risk/reward ratio trades.

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

Our intraday outlook is neutral. 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 U.S. stock market indexes lost 0.3-1.2% on Tuesday, as investors reacted to new trade tariffs on China overnight announcement. The S&P 500 index retraced most of its early June advance, but it closed above the level of 2,750. It currently trades 3.8% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average lost 1.2%, as it was relatively much weaker than the broad stock market, and the technology Nasdaq Composite lost just 0.3% on Tuesday.

The nearest important level of resistance of the S&P 500 index remains at around 2,780-2,800, marked by the recent local highs along with the mid-March local high. The resistance level is also at 2,830-2,840, marked by the late January short-term consolidation. On the other hand, support level is at 2,750-2,755, marked by the previous level of resistance and yesterday's daily low. The next important level of support is at 2,735-2,740, marked by June the 4th's daily gap-up of 2,736.93-2,740.54. The support level is also at 2,700-2,720.

The broad stock market traded within a short-term consolidation recently, as investors took profits off the table following the early June rally. Then the S&P 500 index retraced most of its early June advance. But it has bounced off support level of around 2,750 yesterday. Is this a new downtrend or just downward correction? There are still two possible medium-term scenarios - bearish that will lead us below the February low following trend line breakdown, and the bullish one in a form of medium-term double top pattern or breakout towards 3,000 mark. There is also a chance that the market will just go sideways for some time, and that would be positive for bulls in the long run (some kind of an extended flat correction). The S&P 500 index trades along its two-month-long upward trend line:

New Uptrend or Just Upward Correction?

The index futures trade 0.3-0.5% higher vs. their yesterday's closing prices. So expectations before the opening pof today's trading session are positive. The European stock market indexes have gained 0.4-1.2% so far. Investors will now wait for some economic data announcements: Existing Home Sales at 10:00 a.m., Crude Oil Inventories number at 10:30 a.m. They will also wait for speeches from the main Central Banks's Chiefs at 9:30 a.m. The broad stock market will likely retrace some more of its yesterday's intraday move down. Was it just a downward correction before going higher? The S&P 500 index remains below the resistance level of 2,800. If it breaks above that level, we could see an advance towards the late January topping pattern. But for now, it looks like some sideways move.

The S&P 500 futures contract trades within an intraday uptrend, as it continues to retrace its yesterday's sell-off. The nearest important level of resistance is at around 2,780, marked by the local high. The next level of resistance is at 2,790-2,800. On the other hand, level of support is at 2,755-2,760, marked by overnight fluctuations. The support level is also at 2,740-2,750, among others. The futures contract breaks slightly above its recent downward trend line, as we can see on the 15-minute chart:

Nasdaq Closer to Record High Again!

The technology Nasdaq 100 futures contract follows a similar path, as it retraces most of its recent decline. It gets closer to Thursday's all-time high of around 7,320 again. It seems that investors don't care about trade tariffs and their potentially negative impact for the big cap tech companies. The nearest important resistance level is at around 7,300-7,320. On the other hand, level of support is at 7,200-7,220, among others. The Nasdaq futures trades just below its last week's record high, as the 15-minute chart shows:

Amazon at New Record High, Apple Still Weaker

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached new record high two weeks ago, as it slightly extended its uptrend following a breakout above the price of $190. Then the stock retraced some of its advance, as it fell below $190 again. It continued the short-term downtrend yesterday, but then it bounced off support level of around $185, marked by the previous local lows. Will it reverse the decline here? We may see an upward correction:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It reached new record high yesterday, despite an overall stock market weakness. So the stock remains relatively very strong. The nearest important level of support is at around $1,670-1,700, marked by the recent local lows. We still can see some negative technical divergences, but there have been no confirmed negative signals so far:

Blue Chips Extend Their Losses

The Dow Jones Industrial Average continued the short-term downtrend, as it broke below its two-month-long upward trend line yesterday. Will it continue lower? For now, it looks like some more medium-term sideways price action. However, if DJIA breaks below the support level of around 24,250-24,500, we could see some more selling pressure:

The S&P 500 index will likely open higher today and it may retrace more of its yesterday's decline. It seems that the market doesn't care so much about yesterday's trade tariffs news. But will it extend the uptrend above the resistance level of around 2,800? It's hard to say. There have been no confirmed negative signals so far.

Concluding, stocks will likely open higher today. Then we may see some uncertainty, as the S&P 500 index gets closer to the resistance level again. It still looks just like a downward correction within the two-month-long uptrend.

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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