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

Intraday outlook: The broad stock market will likely open slightly higher today. We may see a short-term consolidation following the sell-off. There may be some more volatility in the near future.

The U.S. stock market indexes gained 1.2-1.4% on Tuesday, as they retraced some of their Monday's sell-off. Investors reacted to the negative trade war developments and tensions between the U.S. and China on Friday-Monday. The S&P 500 index fell over 200 points from its previous Friday's record high of 3,027.98. The Dow Jones Industrial Average gained 1.2% and the Nasdaq Composite gained 1.4% on Tuesday.

The nearest important resistance level of the S&P 500 index is now at around 2,900-2,920, marked by Monday's daily gap down of 2,898.07-2,914.11. On the other hand, the support level is at 2,850.

The broad stock market broke below its two-month-long upward trend line last week, and then it quickly retraced most of the June-July advance. So, the S&P 500 index is back below the previous medium-term local highs again. For now, it looks like a consolidation following the January-February advance. However, it could also play out as a long-term topping pattern ahead of a more meaningful downward correction:

New Uptrend or Still Just Rebound?

The index futures contracts trade 0.3-0.5% above their Tuesday's closing prices. So expectations before the opening of today's trading session are positive again. The European stock market indexes have gained 0.9-1.4% so far. Investors will wait for the Crude Oil Inventories number release at 10:30 a.m.

The S&P 500 futures contract trades within an intraday uptrend, as it slightly extends its yesterday's rebound. The nearest important resistance level is at around 2,900. On the other hand, the support level is at 2,850-2,860. The futures contract trades along its two-day-long upward trend line, as we can see on the 15-minute chart:

Nasdaq 100 Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. It sold off on Monday after the trading session's close following breaking down below the 7,400 mark. The nearest important support level is now at 7,450-7,500. On the other hand, the resistance level is at 7,600. The Nasdaq futures contract is slightly above its yesterday's daily high, as the 15-minute chart shows:

Tech Stocks - Consolidation Following Sell-Off

Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock continued to trade at the resistance level of $210-215 recently. It broke above its early May local high following last Tuesday's quarterly earnings release. However, the market reversed downwards off its new medium-term high and on Friday it broke below the upward trend line. On Monday it accelerated much lower, as it fell below $200 price:

Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock reached the new record high of $141.68 recently following quarterly earnings release. But on Wednesday it retraced most of the advance and it broke below the two-month-long upward trend line. On Monday it accelerated lower. However, the price remains above the late April local high:

Dow Jones - Short-Term Reversal or just Dead Cat Bounce?

The Dow Jones Industrial Average broke below its upward trend line on Wednesday. So the recent consolidation was a topping pattern. On Thursday the market broke below its previous medium-term high and on Monday it came back below the 26,000 mark. There have been no confirmed positive signals so far. However, we can see some short-term oversold conditions. And the index bounced off its 200-day moving average on Monday:

The S&P 500 index broke below the upward trend line last week, as investors reacted to the Fed's Rate Decision release. We saw technical overbought conditions along with negative technical divergences recently. And the market turned lower. Then it accelerated the downtrend following renewed trade war fears. On Monday we closed our profitable short position ahead of the expected short-term bounce. But the market accelerated lower before bouncing off a support level. For now, it looks like a short-term upward correction.

Concluding, the S&P 500 index will likely open higher today. Then the market may extend its short-term consolidation. There have been no confirmed positive signals so far.

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