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Paul Rejczak

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Stock Trading Alert: Negative Expectations Following Yesterday's Retreat

Stock Trading Alert originally published on August 20, 2015, 6:13 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 lost 0.7-0.9% on Wednesday, retracing their recent move up, as investors reacted to the FOMC's Minutes release, among others. Our yesterday's bearish intraday outlook has proved accurate. The S&P 500 index remains within half-year long medium-term consolidation, as it continues to fluctuate along the level of 2,100. The nearest important level of resistance is at around 2,100-2,115, marked by local highs. On the other hand, support level is at 2,040-2,060, marked by some previous local lows. There have been no confirmed negative signals so far, however, we still can see negative medium-term technical divergences:

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are negative, with index futures currently down 0.7%. The main European stock market indexes have lost 0.4-0.8% so far. Investors will now wait for some economic data announcements: Initial Claims at 8:30 a.m., Existing Home Sales, Philadelphia Fed, Leading Indicators at 10:00 a.m. The S&P 500 futures contract (CFD) trades within an intraday downtrend, as it continues its recent move down. The nearest important level of resistance is at 2,080-2,100, and support level is at 2,040-2,050, as the 15-minute chart shows:

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract (CFD) follows a similar path, as it continues its short-term downtrend. The nearest important level of resistance is at around 4,500. On the other hand, support level is at 4,430-4,450, as we can see on the 15-minute chart:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market retraced its recent move up yesterday, as it extended its short-term consolidation. There have been no confirmed medium-term negative signals so far. However, we continue to maintain our speculative short position (2,098.27, S&P 500 index), as we expect 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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