Briefly:

Intraday trade: The S&P 500 index gained 0.9% on Thursday, after opening 0.4% higher. The broad stock market will probably continue to fluctuate within a short-term consolidation. Therefore, 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 between 0.8% and 1.1% on Thursday, as investors' sentiment improved once again. The S&P 500 index got closer to its resistance level of around 2,740-2,750. It currently trades 4.7% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.8% and the technology Nasdaq Composite gained 1.1% on Tuesday.

The nearest important level of resistance of the S&P 500 index remains at around 2,740-2,750, marked by the previous support level along with last week's Monday's daily gap down of 2,742.94-2,752.68 and some recent local highs. The next resistance level is at 2,780-2,800, On the other hand, the support level is at around 2,695-2,700, marked by the recent daily lows. The support level is also at 2,675-2,680, marked by the late May local low.

The broad stock market accelerated its short-term downtrend more than a week ago, as the S&P 500 index fell the lowest since the end of May. Will the downtrend continue? Or was it some final panic selling before an upward reversal? It's hard to say. If the index breaks below 2,700 mark, we could see more downward action. 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:

Mixed Expectations Ahead of Jobs Data Release

Expectations before the opening of today's trading session are slightly negative, because the index futures contracts 0.1-0.3% lower vs. their Thursday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for the monthly jobs data release: Nonfarm Payrolls, Unemployment Rate at 8:30 a.m. The broad stock market will probably extend its short-term fluctuations close to the above-mentioned resistance level of around 2,740-2,750. Is this a bottoming pattern or just a relatively flat correction within a downtrend? There have been no confirmed positive signals so far.

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 2,740-2,750, marked by the recent local highs. On the other hand, support level is at 2,720-2,730, and the next level of support remains at 2,690-2,700. The futures contract trades above its week-long upward trend line, as we can see on the 15-minute chart:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its overnight advance. The market is at the short-term resistance level of around 7,100-7,150. On the other hand, support level is at 7,000-7,050, among others. The Nasdaq futures contract trades along its recent local highs, as the 15-minute chart shows:

Apple, Amazon - More Fluctuations

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 more than two weeks ago, 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:

Dow Jones - Slightly Bullish Picture

The Dow Jones Industrial Average broke below its two-month-long upward trend line two weeks ago. 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 buying pressure:

The S&P 500 index continued to fluctuate within an almost two-week-long consolidation, as it bounced off support level of 2,700 again. On the other hand, there's a resistance level of 2,740-2,750. Will today's monthly jobs data release help the bulls? Is this some bottoming pattern or just a relatively flat correction before another leg lower?

Concluding, the broad stock market will probably open slightly lower today. However, we may see a different picture after the employment data release at 8:30 a.m. For now, the sentiment is slightly bullish and the broad stock market may take another attempt at breaking higher.

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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