Stocks Slightly Higher, As They Set New Record Highs

Briefly:

Intraday trade: Our Friday's intraday trading outlook was bearish. It proved partly wrong because the S&P 500 index gained just 0.1%, and the index continued to trade within relatively narrow short-term consolidation. The market may retrace some of its recent rally. Therefore, intraday short position is favored again. Stop-loss is at the level of 2,570 and potential profit target is at 2,530 (S&P 500 index).

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

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

The main U.S. stock market indexes gained 0.1-0.2% on Friday, slightly extending their recent uptrend, as investors' sentiment remained bullish. The S&P 500 index has reached yet another new record high at the level of 2,557.65, before retracing some of its intraday move up. The Dow Jones Industrial Average reached new record high at the level of 22,905.33 on Friday, as it gained around 20 points vs. its Thursday's high. The technology Nasdaq Composite also reached new all-time high at the level of 6616.58. The nearest important level of support of the S&P 500 index remains at around 2,540, marked by recent fluctuations. The next support level is at 2,520-2,530, marked by previous daily gap up of 2,519.44-2,520.40 and short-term local lows. The support level is also at 2,500-2,510, marked by previous level of resistance and local highs. On the other hand, resistance level is at around 2,555, marked by the above-mentioned new all-time high. The S&P 500 index accelerated its uptrend recently. We still can see medium-term negative technical divergences along with technical overbought conditions. However, there have been no confirmed negative signals so far:

Slightly Positive Expectations

Expectations before the opening of today's trading session are slightly positive, with index futures currently between 0.0% and +0.2% vs. their Friday's closing prices. The European stock market indexes have gained 0.1-0.2% so far. Investors will now wait for the Empire State Manufacturing Index release at 8:30 a.m. The market expects that it was at 20.3 in October. Investors will also wait for quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday consolidation, following an overnight move up. The nearest important resistance level is at around 2,555, marked by new record high. On the other hand, the nearest important support level is at 2,550. The next level of support is at 2,540-2,545, marked by previous resistance level and some local lows. The support level is also at 2,530, marked by short-term consolidation. The futures contract is trading above its two-day-long upward trend line, as we can see on the 15-minute chart:

Tech Stocks Reach New Record High

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation along new record high. It broke above the resistance level of 6,100 this morning. The nearest important support level is now at around 6,080-6,100, and the next support level remains at around 6,040-6,060, marked by short-term consolidation. The Nasdaq 100 futures contract trades along new record high, as the 15-minute chart shows:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com) again. It remains relatively weaker than record-breaking broad stock market indexes. The stock price bounced off support level at around $150 at the end of September. It retraced some of its early September decline. Is this a new uptrend or just upward correction? We can see some potential negative rising wedge - bear flag pattern. Will it break lower?

The Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) shows that blue-chip index trades along new record highs, as it gets closer to 23,000 mark. There have been no confirmed negative signals so far. However, we still can see negative technical divergences. The price continues higher, while technical indicator like RSI (Relative Strength Index) forms a lower high or remains at the same level. It shows us that even though price reaches new highs, the fuel for the uptrend starts running low. Bearish divergence is a moderately useful tool for detecting a coming reversal in the bullish trend, therefore it needs a confirmation. We can see relatively steep month-long upward trading channel or a negative rising wedge pattern. Is this a topping pattern?

Concluding, the S&P 500 index slightly extended its uptrend on Friday, as it gained 0.1%. The market reached new record high above 2,550 mark. Will uptrend continue even further? Or is this some topping pattern before downward correction? There have been no confirmed negative signals so far. However, we can see technical overbought conditions, along with very bullish investors' sentiment. The broad stock market may retrace some of its recent advance at some point.

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Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts