Trading position (short-term; our opinion): No positions are justified from the risk/reward perspective.
Intraday outlook: The broad stock market will likely open higher today. The S&P 500 index may get very close to the resistance level. And we could see an attempt at breaking above the consolidation.
The U.S. stock market indexes gained 1.3-1.5% on Thursday, as they extended their short-term advance. The S&P 500 index got back to the previous local highs again. We may see an attempt at breaking above the month-long consolidation. The broad stock market's gauge is now 3.4% below July the 26th record high of 3,027.98. The Dow Jones Industrial Average gained 1.3% and the Nasdaq Composite gained 1.5% on Thursday.
The nearest important resistance level of the S&P 500 index is 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 yesterday'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:
Positive Expectations Again
The index futures contracts trade 0.5-0.6% above their Thursday's closing prices. So expectations before the opening of today's trading session are bullish again. The European stock market indexes have gained 0.6-1.1% so far. Investors will wait for series of economic data releases today: Personal Income, Personal Spending at 8:30 a.m., Chicago PMI at 9:45 a.m., Revised UoM Consumer Sentiment at 10:00 a.m.
The S&P 500 futures contract trades within an intraday uptrend, as it extends its recent advance. The nearest important resistance level is now at 2,950. On the other hand, the support level is at 2,920. The futures contract is now above its last week's local highs, as the 15-minute chart shows:
Nasdaq 100 Also Higher
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. It bounced off a support level of 7,350-7,400 recently. And this morning it is at the previous local high and the resistance level of around 7,750-7,800. The Nasdaq futures contract remains above its two-day-long upward trend line, as we can see on the 15-minute chart:
Apple, Microsoft - Closer to Breakout?
Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). The stock sharply reversed its recent upward course a week go on Friday, as it fell closer to the $200 price again. On Monday 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 retraced most of its recent advance last Friday, as it fell to a support level of $130-135 again. It still looks like a consolidation within a medium-term uptrend:
Dow Jones at Previous Local Highs
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 last week's Friday the Dow fell to its average, but then it bounced and broke above the 26,000 mark again:
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. Recently it has been rebounding off a support level of around 2,800-2,820. Late last week it reached that support level again. There will likely be another attempt at breaking above this month's local highs.
Concluding, the S&P 500 index will likely open higher today. We may see an attempt at breaking higher. However, investors will wait for series of economic data announcements.
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
