Briefly:

Intraday trade: The S&P 500 index lost 0.1% on Monday, after opening virtually flat. Our Monday's intraday outlook has proved accurate. The broad stock market will likely open slightly lower today. There may be more short-term uncertainty, as stocks trade close to their medium-term resistance level. 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 -0.3% and +0.2% on Monday, as investors took short-term profits off the table following the recent advance. The S&P 500 index continued to trade along the level of 2,800. It is currently 2.6% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.2% and the technology Nasdaq Composite lost 0.3% on Monday.

The nearest important level of support of the S&P 500 index remains at around 2,780-2,785, marked by the recent local lows. The next support level is at 2,765-2,770, marked by last week's Wednesday's local low along with last week's Monday's daily gap up of 2,764.41-2,768.51. On the other hand, the resistance level remains at around 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 a week ago. 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. The S&P 500 index is closer to breaking higher:

Negative Expectations

Expectations before the opening of today's trading session are negative. The broad stock market will likely be relatively stronger than the technology stocks following yesterday's worse-than-expected quarterly earnings release from Netflix. The index futures contracts trade between -0.3% and -1.0% vs. their yesterday's prices at 4:00 p.m. The main European stock market indexes have lost 0.2-0.4% so far. Investors will wait for some economic data announcements today: Industrial Production, Capacity Utilization at 9:15 a.m., NAHB Housing Market Index at 10:00 a.m. There will also be a testimony from Fed Chair Powell at 10:00 a.m. The broad stock market will likely extend its short-term fluctuations. The S&P may continue to fluctuate along the level of 2,800. Investors will wait for more quarterly earnings releases.

The S&P 500 futures contract trades within an intraday consolidation following an overnight decline. The nearest important level of resistance is at around 2,795-2,800, marked by a short-term consolidation. The resistance level is also at 2,805-2,810, marked by the local highs. On the other hand, support level is at 2,790, marked by this morning's local low. The futures contract broke below its recent upward trend line, as we can see on the 15-minute chart:

Nasdaq Relatively Weaker

The technology Nasdaq 100 futures contract is relatively weaker than the broad stock market, as investors react to yesterday's Netflix's quarterly earnings release. The market is retracing some of its recent record-breaking rally. It bounced off 7,400 mark, and it is currently closer to the level of 7,300. The nearest important level of support is at around 7,200-7,250. The Nasdaq futures contract retraces most of its last week's Thursday's advance, as the 15-minute chart shows:

Technology Stocks - Mixed Picture Ahead of Earnings Releases

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock slightly extended its advance last week, 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 price of $1,841.95. It will likely retrace some of its recent rally now. The nearest important level of support is at around $1,800, marked by the previous resistance level. We still can see negative medium-term technical divergences. But there have been no confirmed negative signals so far:

Netflix, Inc. (NFLX) released its quarterly earnings yesterday after-hours. It will likely break below the medium-term upward trend line at the opening of today's trading session. Potential level of support is at around $320, marked by some previous local highs as we can see on the daily chart:

Dow Jones Still Relatively Stronger

The Dow Jones Industrial Average continued to trade above the level of 25,000 yesterday. The market extended its short-term uptrend recently, but will it continue higher despite some short-term overbought conditions? There have been no confirmed negative signals so far. The 200-day moving average acted as a support level in the early July:

The S&P 500 index continued to trade close to 2,800 mark yesterday, but we may see some weakness today. The broad stock market will likely bounce off that resistance level again. Is this a downward reversal or just quick correction before breaking higher? Investors will wait for more quarterly corporate earnings releases.

Concluding, the broad stock market will likely open slightly lower today. We may see more short-term uncertainty, as the S&P 500 index continues to trade 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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