Briefly:
Intraday trade: Our Wednesday's intraday trading outlook was neutral. It proved accurate, because the S&P 500 gained 0.1% following neutral opening of the trading session. The broad stock market extended its short-term fluctuations. 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.
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 0.05-0.10% on Wednesday, extending their short-term consolidation, as investors continued to hesitate following the early December rally. The S&P 500 index trades around 0.4% below last week's Monday's new all-time high of 2,694.97. The Dow Jones Industrial Average and the technology Nasdaq Composite were virtually flat yesterday. The nearest important level of support of the S&P 500 index remains at around 2,680, marked by last week's Monday's daily gap up of 2,679.63-2,685.92. The next support level is at 2,670, marked by recent consolidation. The level of support is also at 2,640-2,650, marked by the December 8 daily gap up of 2,640.99-2,644.10. On the other hand, the nearest important level of resistance is at 2,685, marked by local high. The next resistance level is at around 2,695-2,700, 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:
Positive Expectations
Expectations before the opening of today's trading session are positive, with index futures currently up 0.1-0.3% vs. their Wednesday's closing prices. The European stock market indexes have been mixed so far. Investors will wait for some economic data announcements: Initial Claims, Trade Balance, Wholesale Inventories at 8:30 a.m., Chicago PMI number at 9:45 a.m., Crude Oil Inventories at 10:30 a.m. The market expects that the Chicago PMI was at 62.2 in December, and Initial Claims were at 240,000 last week. The S&P 500 futures contract trades within an intraday uptrend, as it extends its yesterday's rebound off support level at around 2,680. The nearest important level of resistance is at 2,690-2,700, marked by record high. The futures contract remains just below its resistance level, as the 15-minute chart shows:
Nasdaq Goes Sideways
The technology Nasdaq 100 futures contract follows a similar path, as it retraces its yesterday's intraday move down. The nearest important level of resistance is at around 6,480-6,500. marked by some recent fluctuations. On the other hand, support level is at 6,430-6,450, marked by short-term local lows. The Nasdaq 100 futures contract trades within a two-day-long consolidation, 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 on Monday last week, as it broke above $175 mark. However, it failed to continue that rally and fluctuated along the level of $175. On Tuesday, the stock fell to support level of around $170, marked by the early November daily gap up. Is this a short-term bottom or just pause before another leg down?
The Dow Jones Industrial Average daily chart shows that blue-chip index continues to fluctuate following the early December move up. 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. There is a potential two-month-long rising wedge pattern:
Concluding, the S&P 500 index gained 0.1% on Wednesday, as it retraced its Tuesday's move down. The broad stock market continues to fluctuate following the early December advance. Is this a topping pattern or just another relatively flat correction within an uptrend? We still can see medium-term overbought conditions along with negative technical divergences. However, there have been no confirmed negative signals so far.
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Thank you.
Paul Rejczak
Stock Trading Strategist
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