Stock Trading Alert originally published on January 11, 2016, 6:56 AM:
Briefly: In our opinion, no speculative positions are justified.
Our intraday outlook is now neutral, and our short-term outlook is neutral:
Intraday outlook (next 24 hours): neutral
Short-term outlook (next 1-2 weeks): neutral
Medium-term outlook (next 1-3 months): bearish
Long-term outlook (next year): bullish
The U.S. stock market indexes lost 0.8-1.1% on Friday, extending their recent sell-off, as investors reacted to global stock markets' decline, monthly jobs data release, among others. The S&P 500 index got closer to its last year's August - September lows. The nearest important level of support is at around 1,870-1,900. On the other hand, resistance level is at 1,980-2,000, marked by recent local lows. There have been no confirmed positive signals so far. However, we can see short-term oversold conditions which may lead to an upward correction at some point. The market continues to trade below last year's February - August consolidation. It has become a crucial medium-term resistance level, as we can see on the daily chart:
Expectations before the opening of today's trading session are slightly positive, with index futures currently up 0.1-0.2%. The main European stock market indexes have been mixed so far. The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of Friday's sell-off. The nearest important level of resistance is at around 1,930, marked by recent local lows. On the other hand, support level is at 1,890-1,900. For now, it looks like another upward correction within a short-term downtrend. There have been no confirmed downtrend reversal signals so far. However, we can see oversold conditions:
The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its recent move down. The nearest important level of support is at 4,200-4,220. On the other hand, resistance level is at 4,280-4,300, among others. Is this just a flat correction following recent sell-off or some bottoming pattern before a downtrend reversal? The market continues its lower highs - lower lows sequence so far:
Concluding, the broad stock market extended its short-term downtrend on Friday, as the S&P 500 index got closer to the level of 1,900. It currently trades 10 percent below its last year's May all-time high of 2,134.72, so technically, it is still just a correction following long-term bull market. Will it continue towards last year's August - September lows? There have been no confirmed positive signals so far, however, we can see some short-term technical oversold conditions, which may lead to an upward correction at some point. Therefore, we decided to close our profitable speculative short position (2,077.34, S&P 500 index) on Thursday. It has been closed at the opening of Thursday's cash market trading session (S&P 500 index at around 1,965, following temporary opening price of 1,985.32, S&P 500 futures contract 1,947.90 at 9:30 a.m.). Overall, we gained around 112 index points on that trade. We prefer to be out of the market, avoiding low risk/reward ratio trades. We will let you know when we think it is safe to get back in the market.