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Paul Rejczak

Paul Rejczak

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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