Briefly:
Intraday trade: The S&P 500 index gained 1.1% on Thursday, after opening 0.2% higher. The broad stock market will probably open higher today. Then we may see some more short-term fluctuations along the long-term upward trend line.
Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.
Our short-term outlook is neutral, and our medium-term outlook is neutral:
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral
The U.S. stock market indexes gained 1.1-1.8% on Thursday, extending their short-term uptrend, as investors awaited quarterly corporate earnings releases. The S&P 500 index remained above the level of 2,700, following Wednesday's breakout above that resistance level. It was 11.5% below September the 21st record high of 2,940.91 on Monday. And now it trades 6.8% below the all-time high. The Dow Jones Industrial Average gained 1.1% and the Nasdaq Composite gained 1.8% yesterday.
The nearest important level of resistance of the S&P 500 index is at around 2,750-2,760, marked by the previous level of support. The next resistance level is at 2,780-2,800, marked by mid-October consolidation. On the other hand, the level of support is now at around 2,685-2,705, marked by Wednesday's daily gap up of 2,685.43-2,705.60. The next support level remains at 2,630-2,650.
The broad stock market extended its downtrend on Monday, as the S&P 500 index fell closer to 2,600 mark. Then it bounced sharply and accelerated higher on Wednesday. For now, it looks like an upward correction within a downtrend. However, if the index breaks above 2,750, we could see more buying pressure. The market is at the broken long-term upward trend line, as we can see on the daily chart:
Positive Expectations
Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.2-0.9% above their yesterday's closing prices. The European stock market indexes have gained 0.7-1.5% so far. Investors will wait for the important economic data announcements this morning: Nonfarm Payrolls, Unemployment Rate, Trade Balance at 8:30 a.m., Factory Orders at 10:00 a.m. The broad stock market may continue its short-term uptrend. However, the S&P 500 got closer to the important resistance levels. We may see a profit-taking action at some point.
The S&P500 futures contract trades within an intraday uptrend, as it extends its recent advance. Investors react to a possible trade tariffs deal news. The nearest important level of resistance is now at around 2,760-2,765, and the next resistance level is at 2,780-2,800, marked by some previous fluctuations. On the other hand, the support level remains at 2,730-2,740, among others. The futures contract trades above its short-term upward trend line, as the 15-minute chart shows:
Nasdaq Higher Despite Apple's Earnings Disappointment
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market sold off yesterday after-hours following the quarterly earnings release from Apple. But it came back higher after an overnight possible trade tariffs deal news. The nearest important level of resistance is now at around 7,150-7,200, marked by some previous local highs. On the other hand, the support level is at 7,000-7,050, among others. The Nasdaq futures contract is back above 7,000, as we can see on the 15-minute chart:
Big Cap Tech Stocks' Upward Correction
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It retraced most of its short-term decline recently following bouncing off the support level of around $205-215. The stock will likely come back lower today, as investors react to yesterday's quarterly earnings release. For now, it looks like a consolidation:
Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its sell-off following last Thursday's quarterly earnings release. The stock continued lower this week, but then it bounced off support level of $1,500. Will it continue higher? Or was this just a quick upward correction before another leg down? The market may fluctuate along the resistance level of around $1,700 for some time:
Dow Jones Also Higher
The Dow Jones Industrial Average keeps retracing some of its recent decline. The market got back above the level of 25,000. The nearest important level of resistance is now at around 25,750, marked by the previous local high. The resistance level is also at 26,000:
The S&P 500 index trades within a short-term uptrend, as it retraces some of its recent decline. On Monday it fell close to the level of 2,600 before bouncing off at the end of the day. Stocks may have reached their short-term panic bottom. But will the bounce continue? The market is at the important level of resistance of 2,750-2,760.
Concluding, the S&P 500 index will probably open higher today, following an overnight trade tariffs news. However, we may see more volatile fluctuations, as investors will react to the monthly jobs data release at 8:30 a.m.
Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.
Thank you.
Paul Rejczak
Stock Trading Strategist
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