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Stock Trading Alert: Mixed Expectations Following Friday's Move Down - Will It Continue Lower?

Stock Trading Alert originally published on May 16, 2016, 6:57 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:

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 main U.S. stock market lost 0.4-1.1% on Friday, as investors reacted to some economic data announcements. The S&P 500 index got close to the level of 2,050 again. The nearest important level of support is at around 2,030-2,040, marked by previous local lows. The next important support level is at 2,000-2,020. On the other hand, resistance level is at 2,070-2,085, marked by last week's local highs. The next important level of resistance remains at 2,100-2,110, marked by late April highs. Last year's highs along the level of 2,100 continue to act as medium-term resistance level. Will the market break above these medium-term highs and continue its seven-year long bull market?

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are virtually flat, with index futures currently down 0.1%. The European stock market indexes have lost 0.5-1.1% so far. Investors will now wait for some economic data announcements: Empire Manufacturing number at 8:30 a.m., NAHB Housing Market Index at 10:00 a.m. The S&P 500 futures contract trades within an intraday consolidation, following its Friday's decline. The nearest important level of resistance remains at around 2,050, marked by today's local high. The next resistance level is at 2,060, marked by Friday's local high. On the other hand, support level is at around 2,035-2,040, among others. The market trades close to its previous local low. Is this a bottoming pattern or just consolidation before another leg down? There have been no confirmed positive signals so far. But will it break below its previous lows?

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract trades within a similar intraday consolidation, as it continues to fluctuate above the level of 4,300. The nearest important level of support is at 4,300, and resistance level is at 4,350-4,360, marked by recent local highs, among others, as we can see on the 15-minute chart:

NASDAQ 100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market extended its short-term downtrend on Friday. However, it has managed to stay above some previous week's local lows. It still looks like a correction following February - April rally. The index remains relatively close to last year's medium-term highs along the level of 2,100 and continues to trade above its late March - early April lows. It still looks like a correction within a medium-term uptrend, so 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.

Thank you.

 

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