Briefly:

Intraday trade: The S&P 500 index lost 0.1% on Thursday, after opening 0.1% higher. Our yesterday's intraday outlook proved accurate. The stock market will likely open lower today, as investors intensified their profit-taking action. However, it doesn't look like a new downtrend. 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 -0.7% and +0.4% on Thursday, as investors hesitated following recent run-up. The S&P 500 index remained virtually flat after reaching new local high of around 2,780. It currently trades 3.6% below January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.4%, as it was relatively stronger than the broad stock market again, and the technology Nasdaq Composite lost 0.7% yesterday.

The nearest important level of resistance of the S&P 500 index is at around 2,780-2,800, marked by mid-March local high, yesterday's daily 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 2,750, marked by recent level of resistance. The support level is also at 2,735-2,740, marked by 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 resistance level of 2,750. Will it continue higher despite short-term overbought conditions? We may see some more uncertainty and profit taking action today. 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):

Negative Expectations, Just Correction?

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.6-1.1% below their yesterday's closing prices. The main European stock market indexes have lost 0.3-0.7% so far. Investors will wait for the Wholesale Inventories number release at 10:00 a.m. The broad stock market will likely retrace some more of its recent advance today. For now, it looks like a downward correction, and not a new downtrend. There have been no confirmed negative signals so far.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces its overnight rebound. The nearest important level of resistance is at around 2,760-2,765, marked by recent fluctuations. The resistance level is also at 2,780. On the other hand, support level is at 2,750. The next important level of support is at 2,740, marked by previous local highs. The futures contract broke below its week-long upward trend line, as we can see on the 15-minute chart:

Nasdaq Also Lower

The technology Nasdaq 100 futures contract follows a similar path, as it extends its yesterday's decline. The market reached new all-time high yesterday, slightly above its mid-March top. Then it quickly reversed its upward course. The Nasdaq 100 fell more than 150 points off yesterday's daily high. So, volatility is back. The nearest important level of resistance is at around 7100-7150. The resistance level is also at 7,200-7,230. On the other hand support level is now at 7,050-7,080, and the next level of support is at 7,000. The Nasdaq futures contract bounced off its yesterday's new record high, as the 15-minute chart shows:

Apple, Amazon Remain Close to Record Highs

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached another new record high yesterday, as it slightly extended its short-term uptrend following Monday's breakout above $190. There is still a potential resistance level of around $200. Investors' sentiment is bullish, but will uptrend continue? There have been no confirmed short-term negative signals so far:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its uptrend recently, as it reached new record high above $1,700. The stock retraced some of this rally yesterday. Is this a downward reversal or just quick downward correction? For now, it looks like a downward correction. The resistance level remains at around $1,700:

Dow Jones Relatively Stronger

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, we wrote that "the market is taking an attempt at breaking higher". And it did break up above 25,000 mark. We could see some short-term uncertainty and profit-taking action here:

The S&P 500 index slightly extended its short-term uptrend yesterday, but it closed virtually flat. Tech stocks trade within a correction of their recent rally, and the broad stock market is affected. Expectations before the opening of today's trading session are negative, so we may see some more profit-taking action. However, there have been no confirmed negative signals so far.

Concluding, the S&P 500 index will likely open lower today. Tech stocks will probably be weaker than the broad stock market again. For now, it looks like a downward correction, and not a new downtrend. But if the S&P 500 index breaks below its previous resistance level of around 2,750, we could see more selling pressure.

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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