Briefly:

Intraday trade: The S&P 500 index gained 0.2% on Tuesday, after opening 0.1% higher. Our yesterday's intraday neutral outlook proved accurate. The stock market will likely open flat again and extend its short-term consolidation along the resistance level. Then we could see an increased volatility following the FOMC Statement release at 2:00 p.m. 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 were mixed between 0.0% and +0.6% on Tuesday, as investors' sentiment remained slightly bullish. The S&P 500 index is still close to its mid-March local high of around 2,800. It currently trades 3.6% below January's 26th record high of 2,872.87. The Dow Jones Industrial Average was unchanged again, and the technology Nasdaq Composite gained 0.6% yesterday.

The nearest important level of resistance of the S&P 500 index remains at around 2,780-2,800, marked by mid-March local high. The next resistance level is at 2,830-2,840, marked by the late January short-term consolidation. On the other hand, support level is at 2,760-2,765, marked by the recent local lows. The next level of support is at 2,750, marked by previous level of resistance. The support level is also at 2,735-2,740, marked by last Monday's daily gap-up of 2,736.93-2,740.54.

The broad stock market accelerated its short-term uptrend recently following the S&P 500 index' breakout above the resistance level of 2,750. Will it continue higher despite short-term overbought conditions? We may see some more uncertainty and profit taking action, because the market is close to the next resistance level of around 2,800. Investors will now wait for today's FOMC Statement release. There are still two possible medium-term scenarios - bearish that will lead us below 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):

All Eyes on Fed

Expectations before the opening of today's trading session are slightly positive, because the index futures contracts trade 0.2-0.3% higher vs. their yesterday's closing prices. The European stock market indexes have gained 0.3-0.5% so far. Investors will wait for some economic data announcements: Producer Price Index at 8:30 a.m., Crude Oil Inventories at 10:30 a.m., the FOMC Statement release at 2:00 p.m. The broad stock market will likely extend its short-term fluctuations along the above-mentioned resistance level of around 2,800. We may see an increased volatility following Fed's Decision release. There have been no confirmed negative signals so far.

The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates after yesterday's move up. The nearest important level of resistance is at around 2,790-2,800, marked by the local highs. On the other hand, support level is at 2,775-2,780, marked by the recent resistance level. The support level is also at 2,770. The futures contract remains above its 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 fluctuates within an intraday consolidation. The market reaches new all-time highs today, slightly above the mid-March top. The nearest important level of resistance is now at around 7350. On the other hand support level is at 7,200, marked by the recent level of resistance. The next level of support is at around 7,150. The Nasdaq futures contract trades along its new all-time high, as the 15-minute chart shows:

Apple, Amazon - Still Close To Record Highs

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached new record high on Thursday, as it slightly extended its short-term uptrend following last Monday's breakout above $190. Then the stock retraced some of its advance on Friday, as it fell closer to $190 again. Investors' sentiment remains bullish, but will the uptrend continue? There have been no confirmed negative signals so far. For now, it looks like a short-term consolidation:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its uptrend last week, as it reached new record high above $1,700. The stock retraced some of this rally recently. Is this a downward reversal or just a quick downward correction? For now, it looks like a downward correction. The resistance level remains at around $1,700. We can see some negative technical divergences, but there have been no confirmed negative signals so far:

Dow Jones at Resistance Level

The Dow Jones Industrial Average broke above its medium-term downward trend line in the first half of May. Then it continued higher above a few-week-long downward trend line. However, it kept bouncing off resistance level of 25,000. In the second half of May blue-chip stocks were relatively weaker than the broad stock market, as Dow Jones fell below 24,500 again. On Wednesday a week ago, we wrote that "the market is taking an attempt at breaking higher". And it did break up above 25,000 mark. It remains relatively stronger than the broad stock market. However, we can see some selling pressure, as the index gets closer to previous local highs:

The S&P 500 index extended its short-term uptrend on Monday, as it got closer to the resistance level of 2,800. Will stocks continue higher despite some technical overbought conditions? If the index breaks above 2,800, we could see more buying pressure. But there is a chance that the market reverses its upward course after bouncing off the resistance level.

Concluding, the S&P 500 index may open virtually flat again, as investors await the FOMC Statement release today. Then we will probably see an increased volatility. The market may attempt at breaking above the resistance level of 2,800. Overall, there have been no confirmed negative signals so far.

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
Stock Trading Alerts