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Paul Rejczak

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: Negative Expectations Following Last Week's Rally - Correction or Reversal?

Stock Trading Alert originally published on November 23, 2015, 6:43 AM:


 

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,140 and profit target at 1,990, 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): bearish
Long-term outlook (next year): bullish

The U.S. stock market indexes gained 0.4-0.7% on Friday, extending their recent move up, as investors reacted to economic data releases. The S&P 500 index continues to trade below resistance level of 2,100. The next important level of resistance is at around 2,130, marked by May all-time high. On the other hand, level of support remains at 2,020-2,050. For now, it looks like a consolidation following October rally:

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are negative, with index futures currently down 0.2-0.3%. The main European stock market indexes have lost 0.4-0.9% so far. Investors will now wait for the Existing Home Sales number release at 10:00 a.m. The S&P 500 futures contract (CFD) trades within an intraday downtrend, as it retraces Friday's advance. The nearest important level of resistance is at 2,090-2,100. On the other hand, support level is at 2,070-2,080, 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 retraces its Friday's advance. The nearest important level of resistance is at 4,700, and support level is at 4,650, among others, as we can see on the 15-minute chart:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market extended its short-term move up on Friday, as it got closer to its early November local high. However, it bounced off resistance level of 2,100. Despite recent rally, there have been no confirmed positive signals so far. Therefore, we continue to maintain our speculative short position (2,088.35, S&P 500 index). Stop-loss is at 2,140 and potential profit target is at 1,990 (S&P 500 index). 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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