Briefly:
Intraday trade: The S&P 500 index gained 0.6% on Monday, after opening 0.1% higher. The broad stock market will probably open slightly lower today. We may see 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 were mixed between -0.4% and +0.8% on Monday, extending their short-term consolidation, as investors continued to hesitate following last week's rebound off the new medium-term lows. The S&P 500 index continues to trade above the level of 2,700 after breaking higher on Wednesday. It was 11.5% below September the 21st record high of 2,940.91 on Monday a week ago. And now it trades 6.8% below the all-time high. The Dow Jones Industrial Average gained 0.8% and the Nasdaq Composite lost 0.4% yesterday.
The nearest important level of resistance of the S&P 500 index remains at around 2,750-2,760, marked by the previous level of support and Friday's daily high. 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 last 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 a week ago, 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:
Short-term Consolidation
Expectations before the opening of today's trading session are slightly negative, because the index futures contracts trade 0.2-0.3% lower vs. their Monday's closing prices. The European stock market indexes have lost 0.1-0.6% so far. Investors will wait for the JOLTS Job Openings number release at 10:00 a.m. The broad stock market may extend its short-term fluctuations today. The S&P 500 got closer to the important resistance levels and we may see some more profit-taking action.
The S&P 500 futures contract trades within an intraday consolidation, as it extends its short-term fluctuations above 2,700 mark. The nearest important level of resistance is at around 2, 735-2,745, marked by the recent local highs. The next resistance level is at 2,755-2,765, among others. On the other hand, the support level is at 2,700-2,710. The futures contract remains relatively close to its short-term local high, as the 15-minute chart shows:
Nasdaq Below 7,000 Mark
The technology Nasdaq 100 futures contract follows a similar path, as it extends its short-term fluctuations. The market sold off after Thursday's quarterly earnings release from Apple. The nearest important level of resistance is now at around 6,950-7,050. The next resistance level remains at 7,150-7,200, marked by the previous local highs. On the other hand, the support level is at 6,850-6,900, among others. The Nasdaq futures contract fluctuates following its Friday's decline, as we can see on the 15-minute chart:
Apple Extended the Sell-Off, Amazon Relatively Stronger
Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It sold off below the level of $200 yesterday, before bouncing off slightly above the support level. It is currently relatively weaker than the broad stock market, as investors continue to react to Thursday's quarterly earnings release. The stock fell the lowest since the early August. Yesterday we wrote that "...if the price breaks below its short-term local lows of around $205, it could accelerate towards $200 or lower" And it did. Will the stock break even lower? We will probably see some short-term fluctuations along the mentioned support level of $200:
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 last week, but then it bounced off support level of $1,500. Will it continue higher? Or was it just a quick upward correction before another leg down? The market may fluctuate along the resistance level of around $1,650-$1,700 for some time:
Dow Jones Still Close to Local High
The Dow Jones Industrial Average retraced some of its recent decline last week. It got back above the level of 25,000. The nearest important level of resistance is at around 25,500-25,750, marked by the previous local highs. The resistance level is also at 26,000:
The S&P 500 index continues to trade above the level of 2,700, following last Wednesday's breakout higher. Stocks may have reached their short-term panic bottom a week ago on Monday. But will the bounce continue? The market remains at the relatively important level of resistance of 2,750-2,760.
Concluding, the S&P 500 index will probably open slightly lower today, as it continues to fluctuate following last week's bounce off the support level. We may see some more volatile fluctuations along the long-term upward trend line.
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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