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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: New Downtrend or Just Another Pullback Within Two-Month Long Consolidation?

Stock Trading Alert originally published on December 14, 2015, 6:24 AM:


 

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,060 and profit target at 1,900, 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 main U.S. stock market indexes lost 1.8-2.3% on Friday, as investors reacted to economic data releases, among others. Our Friday's negative intraday outlook has proved accurate. The S&P 500 index broke below its mid-November local low, as it got closer to support level of 2,000. The nearest important level of resistance is at around 2,050, marked by previous local lows. for now, it looks like a medium-term consolidation following October rally:

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are positive, with index futures currently up 0.8-0.9%. The European stock market indexes have gained 0.7-1.1% so far. The S&P 500 futures contract (CFD) trades within an intraday uptrend, as it retraces some of its Friday's decline. The nearest important level of support is at around 2,000-2,010, and resistance level is at 2,030-2,040, among others, 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 some of its Friday's move down. The nearest important level of support is at 4,520-4,530, marked by local low. On the other hand, resistance level remains at around 4,600, as we can see on the 15-minute chart:

NASDAQ 100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market accelerated its short-term downtrend on Friday, as the S&P 500 index got closer to 2,000 mark. We continue to maintain our already profitable speculative short position (2,088.35, S&P 500 index). However, we decided to move our stop-loss level to 2,060 and potential profit target level to 1,900 (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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