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 continue to fluctuate along its previous local highs.
The U.S. stock market indexes lost 0.7-1.1% on Tuesday, retracing some of their recent advance, as investors reacted to worse-than-expected economic data releases. The S&P 500 index got back to the previous local highs again last week. But yesterday it bounced off that resistance level again. The broad stock market's gauge is now 4.0% below July the 26th record high of 3,027.98. Both the Dow Jones Industrial Average and the Nasdaq Composite lost 1.1% on Tuesday.
The nearest important resistance level of the S&P 500 index is now at around 2,910-2,925. The resistance level is also at 2,940-2,950, marked by the previous local highs. 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 next support level remains at 2,855-2,860.
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 its early August decline:
Positive Expectations, Back at Resistance Level
The index futures contracts trade between 0.7-1.0% higher vs. their Tuesday's closing prices. So expectations before the opening of today's trading session are positive. The European stock market indexes have gained 0.4-1.0% so far. Investors will wait for some economic data releases today: Trade Balance at 8:30 a.m., Beige Book at 2:00 p.m.
The S&P 500 futures contract trades within an intraday consolidation following overnight advance. The nearest important resistance level is at 2,935-2,945, marked by Friday's local high. On the other hand, the support level is at 2,900-2,910, among others. The futures contract is just below Friday's local high, as the 15-minute chat shows:
Nasdaq 100 Also Higher This Morning
The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. It is close to the resistance level of around 7,750-7,800 again. On the other hand, the nearest important support level is at 7,600-7,650. The Nasdaq futures contract retraced its Monday's sell-off, as we can see on the 15-minute chart:
Big Cap Tech Stocks Still Going Sideways
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. But it keeps bouncing 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:
Dow Jones - Month-Long Consolidation
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 last month. On Friday the blue-chip stocks' gauge was the highest since the early August. But yesterday it got back lower again. We may see some more uncertainty and sideways trading action:
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 some more uncertainty ahead of Friday's monthly jobs data release.
Concluding, the S&P 500 index will likely open higher today. We may see more sideways trading action, as investors will await Friday's important 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
