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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: Stocks Fluctuate Following Recent Rally - Topping Action Or Just A Flat Correction?

Stock Trading Alert originally published on May 18, 2015, 6:07 AM:


 

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,140, 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 virtually flat on Friday, following recent move up, as investors took short-term profits off the table. The S&P 500 index remains very close to its late April all-time high of 2,125.92. The nearest important level of resistance is at around 2,120-2,125. On the other hand, support level is at 2,100, among others. There have been no confirmed negative signals so far. However, we still can see negative technical divergences:

S&P500 Daily Chart
Larger Image

Expectations before the opening of today's trading session are virtually flat, with index futures currently mixed between -0.1% and +0.1%. The main European stock market indexes have gained 0.2-0.8% so far. Investors will now wait for the NAHB Housing Market Index release at 10:00 a.m. The S&P 500 futures contract (CFD) trades within an intraday consolidation, as it extends its short-term fluctuations along record high. The nearest important resistance level is at around 2,120, and support level is at 2,100-2,110, among others, 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 fluctuates following its Friday's downward correction. The nearest important level of support is at around 4,470-4,480, and resistance level is at 4,500, as we can see on the 15-minute chart:

NASDAQ 100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market slightly extended its short-term uptrend on Friday, as the S&P 500 index got closer to its record high. There have been no confirmed negative signals so far. However, we continue to maintain our speculative short position (2,098.27, S&P 500 index), as we expect a downward correction or an uptrend reversal. Stop-loss is at 2,140, 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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