Briefly:

Intraday trade: The S&P 500 index gained 1.6% on Tuesday, after opening virtually flat. The broad stock market will probably open higher today. We may see another attempt at getting back above the previous support level of around 2,700. However, there have been no confirmed positive signals so far.

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 1.6-1.8% on Tuesday, retracing some of their recent sell-off, as investors' sentiment improved ahead of quarterly corporate earnings releases, among other factors. The S&P 500 index got closer to 2,700 mark again. It was 11.5% below September the 21st record high of 2,940.91 on Monday. And now it trades 8.8% below the all-time high. The Dow Jones Industrial Average gained 1.8% and the Nasdaq Composite gained 1.6% yesterday.

The nearest important level of resistance of the S&P 500 index remains at around 2,690-2,700, marked by the previous support level. The next resistance level is at 2,730, marked by the long-term upward trend line. The resistance level is also at 2,750-2,760. On the other hand, the support level is at 2,630-2,650. The level of support is also at around 2,600, marked by Monday's daily low and the early May local low of 2,594.62.

The broad stock market extended its downtrend on Monday, as the S&P 500 index fell closer to 2,600 mark. There have been no confirmed positive signals so far. However, we could see another attempt at reversing higher. The S&P 500 index fell 11.5% off its late September record high, so the downward correction is still slightly smaller than the January's-February's sell-off of 12%:

Positive Expectations

Expectations before the opening of today's trading session are positive, because the index futures contracts trade 0.6-1.0% above their yesterday's closing prices. The European stock market indexes have gained 1.4-2.1% so far. Investors will wait for some economic data announcements: Employment Cost Index at 8:30 a.m., Chicago PMI number at 9:45 a.m., Crude Oil Inventories at 10:30 a.m. Investors will also wait for more quarterly earnings releases. The broad stock market may take another attempt at breaking above 2,700 mark. We still can see short-term technical oversold conditions.

The S&P 500 futures contract trades within an intraday uptrend, as it extends its yesterday's advance. The nearest important level of resistance is now at around 2,700-2,720, marked by the recent local highs. The next resistance level is at 2,740-2,750. On the other hand, the support level is at 2,650-2,670. The next level of support remains at around 2,600-2,630. The futures contract broke above its short-term downward trend line, as the 15-minute chart shows:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The market reached the new low at around 6,580 on Monday. So it fell 1,150 points off its October the 1st record high above the level of around 7,730. We could see more short-term volatility. The nearest important level of resistance is now at around 6,900-6,950. On the other hand, the support level is at 6,800, among others. The Nasdaq futures contract is at its short-term downward trend line, as we can see on the 15-minute chart:

Apple at Support Level Ahead of Tomorrow's Earnings Release

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It reached the new record high at the level of $233.47 in the early October, as it continued to act relatively strong. Then the stock retraced the short-term rally. The support level remained at around $215, and the price kept bouncing off that level despite the overall stock market weakness. However, the market followed the broad stock market's weakness on Monday, as it fell towards the price of $205. Was it a downward correction or the meaningful breakdown lower? The stock came back to the broken support level, so the question remains. Investors will wait for tomorrow's quarterly earnings release.

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its sell-off following Thursday's quarterly earnings release. It continued lower yesterday, as it fell below the price of $1,500. The stock trades within a very strong downtrend. Was yesterday's intraday bounce an upward reversal? For now it looks like a correction within a downtrend:

Dow Jones Reversing Higher?

The Dow Jones Industrial Average reached its new all-time high at the level of 26,951.81 on October the 3rd. Then the blue-chip stocks' gauge broke below its medium-term upward trend lines and the support level of around 26,000. It quickly continued towards the 25,000 mark. There we saw a consolidation, but the index broke lower again. The nearest important level of support is still at around 24,000-24,250, marked by the previous local low. The blue-chip index reached the new medium-term low on Monday. Yesterday we saw a bounce off the mentioned support level:

German DAX Still Below the Resistance Area

Let's take a look at the German DAX index now. It was relatively weaker than the U.S. broad stock market recently, as it remained below its late March local low of 11,727. Last week it accelerated the downtrend following gapping down on Tuesday. The nearest important resistance level is at 11,400-11,500, marked by that daily gap down. Was it a so-called "exhaustion gap" before reversing higher? On Monday, the market retraced some of its recent decline, and it traded within the mentioned gap down:

The S&P 500 index trades within a short-term consolidation following the recent sell-off. 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? There have been no confirmed positive signals so far.

Concluding, the S&P 500 index will probably open higher today. However, we may see more volatile fluctuations. For now, it looks like a consolidation following the recent rout.

Trading position (short-term; our opinion): no positions are justified from the risk/reward perspective.

There will be no Stock Trading Alert tomorrow, on November the 1st. We apologize for inconvenience.

Thank you.

Paul Rejczak
Stock Trading Strategist
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