Briefly:

Intraday trade: The S&P 500 index gained 0.9% on Thursday, after opening 0.3% higher. The broad stock market will likely open virtually flat today, and investors may take some short-term profits off the table. The index is still at the resistance level of around 2,800. 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 gained 0.9-1.4% on Thursday, as investors' sentiment improved ahead of the coming quarterly earnings releases season. The S&P 500 index trades close to the resistance level of around 2,800 again. It is currently just 2.6% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.9% and the technology Nasdaq Composite gained 1.4% on Thursday, as it reached the new record high.

The nearest important level of support of the S&P 500 index is at around 2,780-2,785, marked by yesterday's local low. The next support level is at 2,765-2,770, marked by Wednesday's local low and Monday's daily gap up of 2,764.41-2,768.51. On the other hand, the resistance level remains at 2,800, marked by the previous 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 continued to trade above the level of 2,700:

Uncertainty Along 2,800

The index futures contracts trade between 0.0% and +0.1% vs. their yesterday's closing prices. So expectations before the opening of today's trading session are virtually flat. The main European stock market indexes have gained 0.2-0.4% so far. Investors will wait for the Michigan Sentiment number release at 10:00 a.m. The broad stock market will likely extend its fluctuations along the mentioned resistance level. Will it reverse its short-term uptrend again? It's hard to say. However, we can see some short-term technical overbought conditions.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of its overnight advance. The nearest important level of resistance is at around 2,800-2,805, marked by the local high. On the other hand, support level is at 2,785-2,795, marked by the previous short-term consolidation. The futures contract trades above its short-term upward trend line, as we can see on the 15-minute chart:

Nasdaq at New Record High

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its recent advance. The tech stocks gauge reached the new record high of around 7,414. But it got back below 7,400 mark. The nearest important level of resistance is at around 7,400-7,420. On the other hand, level of support is at 7,300-7,350, among others. The Nasdaq futures contract trades along the level of 7,400, as the 15-minute chart shows:

Amazon at New Record High, Apple Still Lags

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock slightly extended its advance yesterday, but it still trades at the resistance level of around $190-195. On the other hand, support level remains at around $185, marked by the previous level of resistance:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It reached the new record high yesterday at the level of $1,798.00. The nearest important level of support is at around $1,760-1,765, marked by the previous high. We still can see negative medium-term technical divergences. However, there have been no confirmed negative signals so far:

Dow Jones Remains at 25,000 Mark

The Dow Jones Industrial Average continues to trade close to the resistance level of 25,000. The market extends its medium-term consolidation along the level of 24,000-25,500. Will it break higher? It is closer to breaking higher but the blue-chip stocks are still relatively weaker than the broad stock market. The 200-day moving average acted as a support level recently, as we can see on the daily chart:

The S&P 500 index got close to 2,800 mark yesterday, as investors' sentiment improved again. Will the broad stock market break higher? There may be some more short-term uncertainty. However, there have been no confirmed negative signals so far. Investors will now wait for the quarterly corporate earnings releases.

Concluding, the broad stock market will likely open virtually flat today. We may see some more short-term uncertainty, as the S&P 500 index trades along its recent months' highs.

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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