Briefly:

Intraday trade: The S&P 500 index gained 0.9% on Friday, after opening virtually flat. The broad stock market will probably extend its short-term uptrend slightly today. 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 main U.S. stock market indexes gained 0.4-1.3% on Friday, as investors' sentiment improved following the important economic data releases. The S&P 500 index broke above its almost two-week-long consolidation, as it gained 0.9%. It currently trades 3.9% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.4% and the technology Nasdaq Composite gained 1.3%, as it was relatively stronger than the broad stock market on Friday.

The nearest important level of support of the S&P 500 index is now at around 2,740-2,750, marked by the previous resistance level. The next level of support remains at around 2,730. On the other hand, the resistance level is now at 2,780-2,800, marked by some local highs from February, March and June. The level of resistance is also at 2,840, marked by January the 30th daily gap down.

The broad stock market broke above its recent trading range on Friday. Is this a new uptrend or just more medium-term fluctuations following January-February sell-off? If the S&P 500 index breaks above 2,800 mark, we could see more buying pressure. Perhaps we could see a move to new record high. However, 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 a 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 broke below its two-month-long upward trend line recently, but it continues to trade above the level of 2,700:

Closer to June Highs

The index futures contracts trade are trading 0.4-0.5% higher vs. their Friday's closing prices right now, so the expectations before the opening of today's trading session are positive. The European stock market indexes have gained 0.3-0.5% so far. There will be no new important economic data announcements today. The broad stock market will probably extend its short-term uptrend slightly. But there is a close resistance level of around 2,780-2,800. We may see some uncertainty there.

The S&P 500 futures contract trades within an intraday consolidation following an overnight advance. The nearest important level of resistance is at around 2,780-2,800. On the other hand, support level is now at 2,740-2,750, marked by previous resistance level. The futures contract broke above its recent trading range, and it is currently going sideways, as we can see on the 15-minute chart:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it fluctuates after extending its short-term uptrend overnight. The tech stocks sector has retraced most of its late June sell-off and it currently trades closer to the record high of around 7,360. The nearest important level of resistance is at around 7,300-7,360. On the other hand, support level remains at 7,150-7,200, among others. The Nasdaq futures contract trades closer to the level of 7,300, as the 15-minute chart shows:

Big Cap Tech Stocks Breaking Higher Soon?

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It traded within a short-term downtrend since the beginning of June. The decline accelerated, as the price got closer to a potential support level of $180. Then it rebounded and broke slightly above its downward trend line. Since then, it fluctuates. There have been no confirmed positive signals so far, but this may be a bottoming pattern:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It reached the new record high on June the 21st, as it was relatively much stronger than the broad stock market. Then it reversed its short-term uptrend and got closer to the support level of $1,650 again. Since then it fluctuates along the level of $1,700. It looks like a consolidation before breaking higher:

Dow Jones - Reversing Higher?

The Dow Jones Industrial Average broke below its two-month-long upward trend line in the late June. Then it continued lower, as it fell below the level of 24,500. The blue-chip index kept bouncing off a potential support level of around 24,000-24,250 recently. It continues to trade along its 200-day moving average. If it breaks above the resistance level of around 24,500, we could see some more buying pressure:

The S&P 500 index broke above its almost two-week-long consolidation on Friday, as it reached the highest since June the 21st. Is this an uptrend leading to new medium-term highs? If the S&P 500 index breaks above 2,800, we could see a move towards the January highs. Overall, the market is closer to breaking above its medium-term consolidation.

Concluding, the broad stock market will probably open higher today. The S&P 500 index may extend its short-term uptrend following Friday's breakout above its almost two-week-long consolidation. On Friday morning we wrote that "the sentiment is slightly bullish and the broad stock market may take another attempt at breaking higher" And it did break higher. But there is a more important resistance level of 2,780-2,800 ahead.

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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