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Paul Rejczak

Paul Rejczak

Writer, Sunshine Profits

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…

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Stock Trading Alert: Friday's Selloff - New Downtrend Or Just A Short-Term Pullback?

Stock Trading Alert originally published on Apr 07, 2014, 6:05 AM:


 

Briefly: In our opinion no speculative positions are justified.

Our intraday outlook is neutral, and our short-term outlook is now neutral, following Friday's move down:

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

The U.S. stock market indexes lost between 1.0% and 2.7% on Friday, as investors reacted negatively to monthly jobs data release. However, the S&P 500 index has managed to reach yet another new intraday all-time high at 1,897.28, before going down to its daily low at 1,863.26. The nearest important resistance remains at 1,880-1,900, and the support is at 1,840-1,850, marked by March local lows, among others. For now, it looks like some sort of a medium-term topping pattern, however, further consolidation along the level of 1,850-1,900 cannot be ruled out:

S&P500 Daily Chart
Larger Image

Expectations before the opening of today's session are negative, with index futures currently down 0.3-0.7%. The main European stock market indexes have lost 0.5-1.1% so far. The S&P 500 futures contract (CFD) trades in a relatively narrow intraday range, following Friday's selloff. The nearest resistance is at around 1,860, with potential support at 1,840-1,850, marked by the late March local lows, as the 15-minute chart shows:

S&P500 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract (CFD) is relatively weaker, as it trades below its March lows. The resistance is at around 3,550, and a potential support is at the psychological level of 3,500. There have been no positive signals so far, however, we can see some oversold:

NASDAQ 100 Futures Chart
Larger Image

So, was Friday's selloff a new downtrend or just a short-term pullback? It's a tough call right now - the signals are mixed and the outlook is unclear. The reason is that the S&P 500 index has invalidated its recent breakout into new all-time highs - extending March consolidation. The question is if it's still a consolidation (bullish implications) or has the consolidation already ended and we should treat breakout's invalidation on a stand-alone basis (bearish implications). Things should become much clearer in the coming days - stay tuned.

Thank you.

 

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