Briefly:

Intraday trade: Our Tuesday's intraday trading outlook was neutral. It proved wrong, because the S&P 500 gained 0.6% following slightly higher opening of the trading session (+0.1%). The broad stock market continued its short-term uptrend, as it reached another new record high yesterday. We still can see medium-term technical overbought conditions. However, there have been no confirmed negative signals so far. Therefore, we prefer to be out of the market again, avoiding low risk/reward ratio trades.

Medium-term trade: In our opinion, no medium-term positions are justified.

Our intraday outlook is neutral today. Our short-term outlook is neutral, and our medium-term outlook is neutral:

Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): neutral

The U.S. stock market indexes gained 0.4-0.8% on Wednesday, extending their short-term uptrend, as investors' sentiment remained bullish following better-than-expected economic data releases. The S&P 500 index has reached yet another new all-time high at the level of 2,714.37. The broad stock market gauge broke above 2,700 mark. The Dow Jones Industrial Average gained 0.4%, as it was relatively weaker than the S&P 500 index again. However, it has also reached new record high at 24,941.92. The technology Nasdaq Composite extended its Tuesday's rally, as it gained 0.8%. It reached new record high above 7,000 mark. The nearest important level of support of the S&P 500 index is now at around 2,695-2,700, marked by recent consolidation. The next level of support is at 2,680-2,685, marked by short-term local low. The support level is also at around 2,670-2,675, marked by last Friday's local low. On the other hand, potential resistance level is at 2,715-2,720, marked by new all-time high. There have been no confirmed negative signals so far. However, we still can see medium-term technical overbought conditions along with negative technical divergences:

Above 2,700 Mark

Expectations before the opening of today's trading session are positive, with index futures currently up 0.2-0.3% vs. yesterday's closing prices. The European stock market indexes have gained 0.1-1.1% so far. Investors will wait for some economic data announcements today: ADP Non-Farm Employment Change number at 8:15 a.m., Initial Claims at 8:30 a.m., Services PMI at 9:45 a.m., Crude Oil Inventories at 10:30 a.m. The market expects that the ADP Employment Change number was at 191,000 in December, and the Services PMI was at 52.4. The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following two-session record-setting rally. The nearest important resistance level is at around 2,715, marked by local highs. On the other hand, support level is at 2,695-2,700, and the next level of support remains at 2,685-2,690, marked by previous resistance level. The futures contract trades above its short-term upward trend line, as the 15-minute chart shows:

Along New Record High

The technology Nasdaq 100 futures contract continues its yesterday's move up, as it trades closer to 6,600 mark. The market is at new all-time high. The nearest important level of resistance is at around 6,600. On the other hand, support level remains at 6,550-6,570, marked by recent fluctuations, and the next level of support is at 6,480-6,500, marked by previous resistance level. The Nasdaq 100 futures contract fluctuates following recent rally, as we can see on the 15-minute chart:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) again. The price reached new record high over two weeks ago, as it broke above $175 mark. It failed to continue that rally and fluctuated along the level of $175. Then, the stock fell to support level of around $170 again, marked by the early November daily gap up. It bounced off the support level on Tuesday. However, yesterday's intraday stock price action was bearish, as it bounced off resistance level:

The Dow Jones Industrial Average daily chart shows that blue-chip index broke above its short-term consolidation yesterday, as it reached new record high. We still can see negative technical divergences. The most common divergences are between asset’s price and some indicator based on it (for instance the index and RSI based on the index). In this case, the divergence occurs when price forms a higher high and the indicator forms a lower high. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low. Despite reaching new all-time high, the index continues to trade below two-month-long rising wedge pattern:

Concluding, the S&P 500 index gained 0.6% on Wednesday, as it extended its long-term bull market. The index broke above 2,700 mark following slightly higher opening of the trading session. Will uptrend continue today? Or is this some topping pattern ahead of downward correction? We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far.

Currently, we prefer to be out of the market, avoiding low risk/reward ratio medium-term trades. We will let you know when we think it is safe to get back in the market.

To summarize: no medium-term positions are justified from the risk/reward perspective at this moment.

Intraday trade:

No intraday position is justified from the risk/reward perspective today.

No medium-term position is justified from the risk/reward perspective at this moment.

Thank you.

Paul Rejczak
Stock Trading Strategist
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