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Positive Expectations Ahead Of Shortened Trading Session

Intraday outlook (next 24 hours): bearishShort-term outlook (next 1-2 weeks): bearishMedium-term outlook (next 1-3 months): neutralLong-term outlook (next year): neutral

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains neutral, following S&P 500 index breakout above last year’s all-time high:

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

The U.S. stock market indexes were mixed between -0.1% and +0.3% on Friday, as investors hesitated following Thursday’s move down. The S&P 500 index fell the lowest since end of May on Thursday, as it got closer to support level of 2,400. It is now trading 1.2% below its June 19 all-time high of 2,453.82. It has reached new record high after a breakout above short-term consolidation along the level of 2,420-2,440. Stocks have rebounded sharply following their mid-May quick two-session sell-off and continued over eight-year-long bull market off 2009 lows. The Dow Jones Industrial Average was relatively stronger on Friday, as it gained 0.3%. It has managed to stay above the level of 21,300. The technology Nasdaq Composite was relatively weaker than the broad stock market, as it lost 0.1% following Thursday’s move down. The nearest important support level of the S&P 500 index is at around 2,415-2,420, marked by some recent local lows. The next support level is at 2,400-2,410, marked by the May 25 daily gap up of 2,405.58-2,408.01, among others. On the other hand, level of resistance is at 2,425-2,430, marked by some recent fluctuations. The next resistance level remains at 2,450-2,455, marked by all-time high. There have been no confirmed negative signals so far. However, we can see overbought conditions and negative technical divergences. The S&P 500 index is trading within its three-week-long consolidation, as we can see on the daily chart:

Daily S&P 500 index chart - SPX, Large Cap Index

New Uptrend?

Expectations before the opening of today’s trading session are positive, with index futures currently up 0.2-0.3% vs. their Friday’s closing prices. The cash market will close at 1:00 p.m. today, ahead of tomorrow’s holiday pause. The European stock market indexes have gained 0.4-1.0% so far. Investors will now wait for some economic data announcements: Construction Spending, ISM Index at 10:00 a.m. The market expects that Construction Spending grew 0.3% in May, and the ISM Index was at 55.0 in June. The S&P 500 futures contract trades within an intraday uptrend, as it retraces its Friday’s late-session decline. The nearest important level of resistance is at around 2,435-2,440, marked by local highs. The next resistance level is at 2,445-2,450, marked by record high. On the other hand, support level is at 2,420, marked by an intraday consolidation, and the next support level is at 2,400-2,410, marked by Thursday’s local low. Will uptrend continue? Or is this an upward correction within a new downtrend?

S&P 500 futures contract - S&P 500 index chart - SPX

Techs Remain Weaker

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of Friday’s intraday move down. The market continues to fluctuate after June 9 sell-off. The nearest important level of resistance is at around 5,700, and the next resistance level is at 5,750-5,750, marked by Thursday’s local highs. On the other hand, support level is at 5,650, and the next support level is at around 5,600, marked by local lows, as the 15-minute chart shows:

Nasdaq100 futures contract - Nasdaq 100 index chart - NDX

Concluding, the S&P 500 index fluctuated on Friday, following Thursday’s move down. Is this just correction before another leg down? Or bottoming pattern before some new uptrend? There have been no confirmed negative signals so far. However, we still can see negative technical divergences, along with some medium-term overbought conditions.

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Thank you.

Paul Rejczak
Stock Trading Strategist
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