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Paul Rejczak

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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: Fluctuations Following Recent Rally - Flat Correction Or Topping Pattern?

Stock Trading Alert originally published on July 23, 2015, 6:55 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 main U.S. stock market indexes lost 0.4-1.1% on Wednesday, as investors reacted to quarterly earnings releases, economic data announcements. The S&P 500 index remains relatively close to its late May all-time high of 2,134.72. The nearest important level of resistance is at around 2,130-2,135. On the other hand, support level is at 2,100. There have been no confirmed negative signals so far, however, we can see negative technical divergences:

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are slightly positive, with index futures currently up 0.1-0.2%. The European stock market indexes have gained 0.1-0.2% so far. Investors will now wait for some economic data announcements: Initial Claims at 8:30 a.m., Leading Indicators at 10:00 a.m. The S&P 500 futures contract (CFD) trades within an intraday consolidation, following yesterday's rebound. The nearest important level of support is at around 2,100, as the 15-minute chart shows:

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract (CFD) trades along the level of 4,630. The nearest important level of resistance is at around 4,635, and support level is at 4,580-4,600, as we can see on the 15-minute chart:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market retraced some of its recent rally yesterday, as investors reacted to quarterly earnings releases. 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 medium-term 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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