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Stocks' Earnings Play - Buying Rumors, Selling Facts?

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Stocks retraced their Thursdays advance on Friday, as investors continued to hesitate following the recent record-breaking rally. The S&P 500 index got back below the 3,000 mark again, following bouncing off the resistance level. Is this a topping pattern or just consolidation within an uptrend?

The U.S. stock market indexes lost 0.3-0.7% on Friday, as they extended their short-term consolidation along the new record highs. The S&P 500 index reached the new record high of 3,017.80 on Monday a week ago. It gained around 290 points from its early June local low of 2,728.81. The Dow Jones Industrial Average lost 0.3% and the Nasdaq Composite lost 0.7% on Friday.

The nearest important resistance level of the S&P 500 index remains at 3,000. The next resistance level is at around 3,015-3,020, marked by the record high. On the other hand, the support level is at 2,965-2,970, marked by the early July local lows.

The broad stock market broke above its short-term consolidation recently and it broke above the 3,000 mark. Is this a real bullish breakout above the last years September-October topping pattern? The S&P 500 continues to trade along the 3,000 level:

Positive Expectations, Upward Correction or Reversal?

The index futures contracts trade 0.3-0.5% above their Fridays closing prices, so expectations before the opening of todays trading session are positive. The European stock market indexes have gained 0.2-0.4% so far. There will be no new important economic data announcements today. However, investors will wait for the quarterly corporate earnings releases.

The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of the Fridays decline. The nearest important resistance level is at 2,990-3,000. On the other hand, the support level is at 2,970-2,975. The futures contract remains close to its Thursdays local lows, as we can see on the 15-minute chart:

Nasdaq 100 Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. It bounced off the 8,000 resistance level again on Friday. The support level is now at 7,800-7,850. The Nasdaq futures contract retraces some of the Fridays decline, as the 15-minute chart shows:

Microsoft Declining from New Record Reversal?

Let's take a look at the Apple, Inc. stock (AAPL) daily chart (chart courtesy of The stock continues to trade above the $200 level. We still can see a short-term consolidation, as the market fluctuates below the early May local highs. The resistance level remains at $210-215, and the support level is at $195-200:

Now let's take a look at the daily chart of Microsoft Corp. stock (MSFT). The stock reached the new record high on Friday, following Thursdays quarterly earnings release. However, it retraced most of the advance on the same day and it got back to the month-long consolidation along the price of $135:

Dow Jones Topping Pattern or Just Consolidation?

The Dow Jones Industrial Average reached the new record high of 27,398.68 on Tuesday. Then it retraced some of the recent rally. For now, it looks like a downward correction. However, we still can see technical overbought conditions:

Nikkei Consolidating

Let's take a look at the Japanese Nikkei 225 index. It broke below the over month-long upward trend line early last week and then it bounced off the 21,000 mark again. The market extends its half-year-long consolidation:

The S&P 500 index reached the new record high on Monday a week ago, as investors sentiment remained bullish ahead of the quarterly corporate earnings releases, among other factors. But then it fluctuated, as investors took profits off the table. The index got back below the 3,000 mark again on Friday. For now, it looks like a consolidation. We could see some more sideways trading action, as investors react to the quarterly corporate earnings releases.

Concluding, the S&P 500 index will likely open higher today. We could see more short-term fluctuations along the 3,000 mark.

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Thank you.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits - Effective Investments through Diligence and Care

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All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczaks reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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About the author

Stock market strategist, who has been known for quality of his technical and fundamental analysis since the late nineties. He is interested in forecasting market behavior based on both traditional and innovative methods of technical analysis. Paul has made his name by developing mechanical trading systems. Paul is the author of Sunshine Profits' premium service for stock traders: Stock Trading Alerts.

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