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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: Stocks Fluctuate Following Month-Long Rally - Will It Continue?

Stock Trading Alert originally published on February 27, 2015, 6:53 AM:


 

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,150 and profit target at 1,980, S&P 500 index)

Our intraday outlook is bearish, and our short-term outlook is bearish:

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): bullish

The U.S. stock market indexes were mixed between -0.2% and +0.5% on Friday, as investors continued to hesitate following recent move up. The S&P 500 index remains close to its Wednesday's all-time high of 2,119.59. The nearest important level of resistance is at around 2,115-2,2120. On the other hand, support level is at 2,000-2,010, marked by previous resistance level. There have been no confirmed negative signals so far. However, we can see overbought conditions accompanied by negative divergences:

S&P500 Daily Chart
Larger Image

Expectations before the opening of today's trading session are slightly negative, with index futures currently down 0.1-0.2%. Investors will now wait for some economic data announcements: U.S. GDP - Second Estimate at 8:30 a.m., Chicago PMI at 9:45 a.m., Michigan Sentiment, Pending Home Sales at 10:00 a.m. The S&P 500 futures contract (CFD) is within an intraday consolidation, following yesterday's move down. The nearest important level of support is at around 2,100-2,150, marked by yesterday's local lows. On the other hand, resistance level is at 2,110-2,115, among others, as we can see on the 15-minute chart:

S&P500 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract (CFD) is relatively stronger, as it fluctuates slightly below its long-term high. The nearest important level of resistance is at around 4,460-4,470, and the next resistance level is at 4,500, as the 15-minute chart shows:

NASDAQ 100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market retraced some of its recent advance yesterday, as short-term volatility slightly increased. There have been no confirmed negative signals. However, we continue to maintain our speculative short position (S&P 500 index), as we expect downward correction or an uptrend reversal. Stop-loss is at 2,150, and potential profit target is at 1,980. You can trade S&P 500 index using futures contracts (S&P 500 futures contract - SP, E-mini S&P 500 futures contract - ES) or an ETF like the SPDR S&P 500 ETF - SPY. It is always important to set some exit price level in case some events cause the price to move in the unlikely direction. Having safety measures in place helps limit potential losses while letting the gains grow.

Thank you.

 

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