Briefly:

Intraday trade: The S&P 500 index lost 0.4% after opening 0.1% higher on Monday. The broad stock market will likely open slightly higher today. We may see an upward correction following the recent decline. We prefer to be out of the market, avoiding low risk/reward ratio trades.

Trading position (short-term; our opinion): short positions in the S&P 500 Index (opened at the level of 2,810 on July the 30th) with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

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

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

The U.S. stock market indexes lost 0.3-0.5% on Monday, retracing some more of their early August advance, as investors' sentiment remained moderately bearish. The S&P 500 index broke below its relatively narrow three-day-long trading range on Friday, following bouncing off the resistance level of around 2,860-2,865. It currently trades 1.8% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average lost 0.5% and the technology Nasdaq Composite lost 0.3% on Monday.

The nearest important level of support of the S&P 500 index is at around 2,820-2,825, marked by the previous local highs along with the recent local lows. The next support level is at 2,800. On the other hand, the nearest important level of resistance remains at 2,845-2,850, marked by Friday's daily gap down of 2,842.20-2,851.98, among others. The resistance level is also at 2,870-2,875, marked by the mentioned January's all-time high.

The broad stock market got close to its January's record high recently, as investors' sentiment improved following quarterly corporate earnings, economic data releases. The S&P 500 index traded within a relatively narrow trading range on Tuesday-Thursday's last week. Then it broke lower on Friday. Was it some medium-term downward reversal or just downward correction before another leg up? There are still two possible medium-term scenarios - bearish that will lead us towards the February low again, and the bullish one - breakout higher towards 3,000 mark. The latter one got very real recently. However, the S&P 500 index bounced of the resistance level marked by the mentioned January's record high last week:

Short-Term Consolidation

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.4-0.6% above their yesterday's closing prices. The European stock market indexes have been mixed so far. There will be no new important economic data announcements today. The broad stock market will probably open higher and retrace some of its Monday's decline. However, there have been no confirmed short-term positive signals so far.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its yesterday's decline. The market remains within a short-term consolidation following
Friday's sell-off. The nearest important level of support is a at 2,820, marked by the recent local lows. On the other hand, level of resistance is at 2,840-2,845, marked by some Friday's and Monday's intraday local highs. The resistance level is a also at 2,850. The futures contract trades within a short-term consolidation following Friday's decline, as we can see on the 15-minute chart:

Nasdaq Closer to Local Highs

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. It gets back closer to its last week's trading range. For now, it looks like some extended short-term consolidation. The nearest important level of resistance is at 7,480-7,500, marked by the recent local highs. The resistance level is also at around 7,530, marked by the late July record high. On the other hand, support level is at 7,380-7,400, marked by some short-term local lows. The Nasdaq futures contract trades above its two-day-long upward trend line, as the 15-minute chart shows:

Apple, Amazon Reached New Record Highs Yesterday!

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). Despite an overall broad stock market weakness, the stock reached new record high yesterday at the level of $210.95. Then it got back lower before the session's close again. There have been no confirmed negative signals so far. However, we may see a downward correction at some point. The nearest important level of support is now at $190-200, marked by the previous resistance level:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It reached yet another new record high on Monday at the level of $1,925.00. The nearest important level of resistance is now at around $1,925. On the other hand, support level is at 1,850. The stock continues to trade above its medium-term upward trend line, as we can see on the daily chart:

Dow Jones Relatively Weaker

The Dow Jones Industrial Average retraced some more of its recent advance yesterday, as it continued lower following Friday's breakdown below the level of 25,500. The blue-chip stocks' gauge continues to fluctuate after its July rally. Is this just a flat correction within an uptrend or some topping pattern before downward reversal? For now, it looks like a flat correction before another medium-term leg up, because there have been no confirmed negative signals so far:

The S&P 500 index fell below its three-day-long consolidation on Friday, as investors reacted to an overnight global stock markets' rout. Yesterday, it remained within a short-term consolidation. The broad stock market retraced some of its early August advance. So is this a new downtrend or just downward correction? For now it looks like a downward correction, and the support level remains at around 2,800.

Concluding, the broad stock market will likely open higher today. The S&P 500 index may fluctuate along its late July short-term consolidation. It may act as a support level. For now, it looks like a downward correction following the early August advance.

Intraday trade:

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

Trading position (short-term; our opinion): short positions in the S&P 500 Index (opened at the level of 2,810 on July the 30th) with a stop-loss order at 2,875 and the initial downside target at 2,768 are justified from the risk/reward perspective.

Thank you.

Paul Rejczak
Stock Trading Strategist
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