Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Intraday outlook: The broad stock market will likely open lower today. Then the S&P 500 index may extend its short-term consolidation.
The U.S. stock market indexes were mixed between -0.1% and +0.2% on Friday, as they extended their short-term consolidation following the recent advance. The S&P 500 index got back to the previous local highs again last week. The broad stock market's gauge is now 3.3% below July the 26th record high of 3,027.98. The Dow Jones Industrial Average gained 0.2% and the Nasdaq Composite lost 0.1% on Friday.
The nearest important resistance level of the S&P 500 index remains at 2,940-2,950, marked by the previous local highs. The resistance level is also at 2,980-3,000. On the other hand, the support level is at 2,890-2,905, marked by the Thursday's daily gap up of 2,890.03-2,905.67.
The broad stock market broke below its two-month-long upward trend line in early August, and then it quickly retraced most of the June-July advance. The S&P 500 index continues to trade within a consolidation following early August decline:
Below Friday's Closing Prices
The index futures contracts trade between +0.1% and +0.2% vs. their yesterday's closing prices. However, they remain 0.4-0.6% below their Friday's closing prices this morning. So expectations before the opening of today's trading session are negative. The European stock market indexes have lost 0.4-0.5% so far. Investors will wait for some economic data releases today: ISM Manufacturing PMI, Construction Spending at 10:00 a.m.
The S&P 500 futures contract trades within an intraday consolidation, as it continues to fluctuate along the 2,900 mark. The nearest important resistance level is at 2,915-2,925. On the other hand, the support level is at 2,885-2,890. The futures contract remains close to the previous local high, as the 15-minute chart shows:
Nasdaq 100 Also Lower
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation following Monday's decline. It bounced off the resistance level of around 7,750-7,800 recently. The Nasdaq futures contract trades along the short-term downward trend line, as we can see on the 15-minute chart:
Tech Stocks Closer to Previous Local Highs
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock reversed its recent upward course recently, as it fell closer to the $200 price again. Last week it bounced off that support level. The market may extend volatile fluctuations following the early August breakdown below its two-month-long upward trend line:
Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock got back to it short term local highs on Friday. It still looks like a consolidation within a medium-term uptrend. We may see an attempt at breaking above the resistance level:
Dow Jones Retracing More of its Early August Sell-Off
The Dow Jones Industrial Average broke below its upward trend line in late July. Then it fell to around 25,500, before bouncing off the 200-day moving average. It kept bouncing off that support level recently. On Friday the blue-chip stocks' gauge was the highest since the early August. This week it may retrace some more of the sell-off. The nearest important resistance level is at 26,700:
The S&P 500 index broke below the upward trend line in late July, as investors reacted to the Fed's Rate Decision release, among other factors. We saw technical overbought conditions along with negative technical divergences then. And the market declined following renewed trade war fears. Then it continued bouncing off the support level of 2,800-2,820. Last week the index got back to the resistance level of around 2,950 again. We may see an attempt at breaking higher.
Concluding, the S&P 500 index will likely open lower today. We may see a short-term consolidation following last week's advance. The market remains close to the resistance level.
Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Thank you.
Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care
