Briefly:
Intraday trade: The S&P 500 index lost 0.2% on Tuesday, after opening 0.2% lower. The broad stock market will probably open lower today. We may see some more short-term fluctuations following the recent rally. We prefer to be out of the market, avoiding low risk/reward ratio trades.
Trading position (short-term; our opinion): no short-term positions are justified from the risk/reward perspective.
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 lost 0.05-0.2% on Tuesday, as investors took some short-term profits off the table following the recent record-breaking rally. The S&P 500 index has reached the record high of 2,916.50 a week ago. It currently trades close to 2,900 mark. The Dow Jones Industrial Average lost 0.05% and the technology Nasdaq Composite lost 0.2% yesterday.
The nearest important level of support of the S&P 500 index is at 2,875-2,885, marked by last week's Monday's daily gap up of 2,876.16-2,884.69. The support level is also at 2,860-2,865. On the other hand, the resistance level is at 2,910-2,915, marked by the mentioned last Wednesday's record high.
The broad stock market reached the new record high last week, as it extended its short-term uptrend above the level of 2,900. We may see more upward price action in the near term, but some downward correction may be coming. The market has retraced its late January - early February downward correction recently. So will it continue towards 3,000 mark? The index still trades above its medium-term upward trend line, as we can see on the daily chart:
Correction or Just Consolidation?
The index futures contracts trade 0.3-0.4% below their yesterday's closing prices. So, expectations before the opening of today's trading session are negative. The European stock market indexes have lost 0.5-1.0% so far. There will be no new important economic data announcements today. The broad stock market will probably extend its short-term consolidation, as the index may remain close to 2,900 mark and trade above the mentioned last week's Monday's daily gap up. There have been no confirmed negative signals so far. However, we can see technical overbought conditions.
The S&P 500 futures contract trades within an intraday consolidation following an overnight decline. The nearest important level of resistance is now at around 2,900, marked by the recent fluctuations. On the other hand, the support level is at 2,885, among others. The futures contract trades below its two-day-long downward trend line, as the 15-minute chart shows:
Nasdaq 1% Below Record High
The technology Nasdaq 100 futures contract follows a similar path, as it trades lower following an overnight decline. The nearest important resistance level is at around 7,650-7,670, marked by the recent local highs. On the other hand, the support level is at 7,580-7,600, marked by the previous level of resistance. The Nasdaq futures contract broke below its recent consolidation, as we can see on the 15-minute chart:
Apple, Amazon at New Record Highs
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached the new record high yesterday at the level of $229.18. The stock remains relatively stronger than the broad stock market. There have been no confirmed negative signals so far. However, we may see a downward correction at some point. The nearest important level of support is now at $215-220, marked by the recent consolidation. The price remains above its month-long upward trend line:
Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It has reached the new record high at the price of $2,050.50 on Tuesday. The stock accelerated its uptrend above its month-long upward trend line recently. We still can see some negative technical divergences. However, there have been no confirmed negative signals so far:
Dow Jones Remains Close to 26,000 Mark
The Dow Jones Industrial Average reached new local highs after breaking above its previous high recently. But the blue-chip stocks' gauge got back below the level of 26,000. And it continues to trade below its late January record high of 26,616.71. The nearest important level of resistance is at 26,340-26,440, marked by the late January daily gap down. The index remains above its two-month long upward trend line, as the daily chart shows:
The S&P 500 index reached the new record high at the level of 2,916.50 last week. Will the uptrend continue towards 3,000 mark? There have been no confirmed negative signals so far. However, we can see some short-term overbought conditions along with negative technical divergences.
Concluding, the S&P 500 index will likely open lower today. Then it may continue to fluctuate following the recent rally. For now, it looks like a downward correction within an uptrend from the August local low of around 2,800.
Intraday trade:
No intraday position is justified from the risk/reward perspective today.
Trading position (short-term; our opinion): no short-term positions are justified from the risk/reward perspective.
Thank you.
Paul Rejczak
Stock Trading Strategist
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