Briefly:

Intraday trade: The S&P 500 index lost 0.3% on Thursday, after opening 0.3% higher. The broad stock market will probably open lower today. We may see more short-term fluctuations along 2,800 mark.

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

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

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

The U.S. stock market indexes were mixed between -0.5% and 0.0% on Thursday, as investors hesitated following the recent rally. The S&P 500 index was 11.5% below September the 21st record high of 2,940.91 on Monday almost two weeks ago. And now it trades just 4.6% below the all-time high. The Dow Jones Industrial Average was unchanged and the Nasdaq Composite lost 0.5% yesterday.

The nearest important level of resistance of the S&P 500 index remains at around 2,815-2,820, marked by mid-October local high of 2,816.94. The next resistance level is at 2,860-2,865, marked by the previous local lows. On the other hand, the support level is at 2,780-2,800, marked by the recent resistance level. The support level is also at 2,755-2,775, marked by Wednesday's daily gap up of 2,756.82-2,774.13.

The broad stock market extended its downtrend around two weeks ago, as the S&P 500 index fell closer to 2,600 mark. Then it bounced sharply and accelerated higher. On Wednesday we wrote that if the index breaks above 2,750, we could see more buying pressure. And the market got back above the broken long-term upward trend line. It is also back above 2,800 mark again. However, the index is at its mid-October local high. Will it continue higher? Well, it still looks like an upward correction following the October sell-off:

Negative Expectations, Correction or Downward Reversal?

Expectations before the opening of today's trading session are negative, because the index futures contracts trade 0.5-0.8% below their Thursday's closing prices. The European stock market indexes have lost 0.7-0.9% so far. Investors will wait for some economic data announcements today: Producer Price Index at 8:30 a.m., Michigan Sentiment number, Wholesale Inventories at 10:00 a.m. The broad stock market will likely extend its short-term consolidation today. The market fluctuates following the recent rally and a breakout above 2,800 mark. There have been no confirmed negative signals so far.

The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of its recent advance. The market got back slightly below the level of 2,800. The nearest important level of resistance is at around 2,800-2,815. On the other hand, the support level is now at 2,775-2,785, marked by the previous short-term consolidation. The futures contract trades close to its short-term upward trend line, as the 15-minute chart shows:

Nasdaq Also Lower

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. The market retraced some of its recent rally after bouncing off the resistance level of around 7,200-7,250. On the other hand, the support level is at around 7,100. The next support level is at 7,000-7,050, among others. The Nasdaq futures contract trades along its two-day-long downward trend line, as we can see on the 15-minute chart:

Apple, Amazon Retrace Some of Their Losses

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It sold off below the level of $200 on Monday, before bouncing off the support level. It was relatively weaker than the broad stock market, as investors continued to react to Thursday's quarterly earnings release. The stock fell the lowest since the early August. On Wednesday the market got back to the broken support level of around $210-215. For now, it looks like an upward correction:

Now let's take a look at Amazon.com, Inc. stock (AMZN) daily chart. It accelerated its sell-off following quarterly earnings release. The stock continued lower last week, but then it bounced off the support level of $1,500. It accelerated higher on Wednesday, however, the price reached a potential resistance level of around $1,750-1,800:

Dow Jones Remains Above 26,000 Mark

The Dow Jones Industrial Average retraced slightly more of its recent decline on Thursday. It accelerated above 26,000 mark and got closer to the early October topping consolidation recently. The nearest important level of resistance is now at around 26,500-27,000, marked by the record high:

Japanese Nikkei Relatively Weaker

Let's take a look at the Japanese Nikkei 225 index now. It retraced more of its October sell-off on Wednesday, but it failed to continue higher today. The market got back above the resistance of October the 25th daily gap down. However, it looks like an upward correction within a downtrend. The Nikkei continues to trade below its broken long-term upward trend line, as the daily chart shows:

The S&P 500 index accelerated its short-term uptrend on Wednesday after breaking above its recent trading range. Stocks reached their short-term panic bottom a week ago on Monday. But will the uptrend continue? The market broke above the important level of resistance of 2,750-2,760. Then it reached the resistance level of around 2,800-2,820. It will likely fluctuate along that resistance level for some time.

Concluding, the S&P 500 index will probably open lower today, as investors may continue taking short-term profits off the table following the recent rally. There have been no confirmed short-term negative 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
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