Stock Trading Alert originally published on January 25, 2016, 6:37 AM:
Briefly: In our opinion, no speculative positions are justified.
Our intraday outlook is neutral, and our short-term outlook is neutral. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence. However, we decided to change our long-term outlook to neutral recently, following recent move down below medium-term lows:
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): neutral
The U.S. stock market indexes gained between 1.3% an 2.8% on Friday, retracing some of their recent move down, as investors reacted to oil prices rally, economic data releases. The S&P 500 index extended its Thursday's move up and managed to close above the level of 1,900. The nearest important level of resistance is at around 1,950-1,960, marked by recent local highs. On the other hand, support level remains at 1,850-1,880. For now, it looks like an upward correction within a short-term downtrend. There have been no confirmed positive signals so far. Quarterly corporate earnings releases may drive stocks higher, however, we will probably see more short-term volatility:
Expectations before the opening of today's trading session are slightly negative, with index futures currently down 0.2-0.3%. The main European stock market indexes have been mixed so far. The S&P 500 futures contract trades within an intraday consolidation, following last week's hefty rebound. The nearest important level of resistance is at around 1,900-1,905. On the other hand, support level is at 1,880-1,885, marked by some Friday's local lows. The market retraces a part of its recent decline. For now, it looks like a correction within a downtrend. However, there have been no confirmed short-term negative signals so far:
The technology Nasdaq 100 futures contract follows a similar path, as it currently trades above the level of 4,200. It is worthwhile to mention that it traded below the level of 4,000 on Wednesday. The nearest important level of support is at around 4,200. The resistance level is at 4,250-4,270, marked by previous intraday local highs. Is this a downtrend reversal or just a quick "oversold" rebound before another leg down? For now, it looks like a correction within a short-term downtrend. However, we continue to see some clearly bullish action here:
Concluding, the broad stock market extended its short-term rebound on Friday, as the S&P 500 index broke above the level of 1,900. Is this a new uptrend or just an upward correction before another leg down? For now, it looks like a "V" type bottom, but we will probably see more short-term volatility ahead. The index may trade along its last year's August - September local lows for some time, as it continues to act as a medium-term level of support. Our speculative long position (1,891.68, S&P 500 index) has been closed at the stop-loss level of 1,840 (S&P 500 index) on Wednesday, as the futures contract broke slightly below the level of 1,835 ahead of the cash market's opening (it currently trades around 5 points lower than the cash market). 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.