Briefly:

Intraday trade: The S&P 500 index gained 0.3% on Monday, after opening 0.5% Lower. The broad stock market will likely extend its short-term fluctuations following yesterday's bounce off the support 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 gained between 0.2% and 0.8% on Monday, following lower opening of the trading session, as investors' sentiment improved despite trade tariffs news release. The S&P 500 index continued to trade along the support level of 2,700. It is currently 5.0% below the January's 26th record high of 2,872.87. The Dow Jones Industrial Average gained 0.2% and the technology Nasdaq Composite gained 0.8% on Monday.

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 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:

Positive Expectations, Yesterday's Rebound to Continue?

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.4-0.5% higher vs. their yesterday's closing prices. The main European stock market indexes have gained 0.6-1.3% so far. Investors will now wait for the Factory Orders number release at 10:00 a.m. So the broad stock market will probably extend its yesterday's advance this morning. Is this a new uptrend or just an advance within a week-long consolidation? If the index breaks above the resistance level of around 2,740-2,750, we could see more buying pressure. However, there have been no confirmed positive signals so far.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces more of its yesterday's overnight sell-off. The nearest important level of resistance is at around 2,740-2,745, marked by the local highs. On the other hand, level of support is at 2,715-2,720, and the next support level is at 2,695-2,700. The futures contract gets closer to its recent local highs, as we can see on the 15-minute chart:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market bounced off support level of around 7,000 again and it is currently trading at the short-term resistance level of 7,150. The next level of resistance is at 7,200-7.220, among others. The Nasdaq futures contract broke above its week-long downward trend line, as the 15-minute chart shows:

Apple, Amazon - Slightly More Bullish Picture

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 a week ago, as the price got closer to a potential support level of $180. Then it rebounded and broke slightly above its downward trend line. Yesterday, the price got close to its recent short-term local highs. It will probably break higher today:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It reached the new record high 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. For now, it looks like a consolidation before another leg up:

Dow Jones Continues Sideways

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 last week. It continues to trade along its 200-day moving average, so it may be some short-term bottoming pattern:

The S&P 500 index extended its short-term consolidation yesterday despite negative expectations ahead of the opening of the trading session. It bounced off the support level of around 2,700 again. But will it continue higher today? There is still a resistance level of around 2,740-2,750. If the market breaks higher, we could see more buying pressure.

Concluding, the broad stock market will likely open higher today, as investors' sentiment improved despite yesterday's trade tariffs news release. The broad stock market is closer to a breakout above the week-long consolidation. We will see if the buyers will prevail this time.

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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