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Paul Rejczak

Paul Rejczak

Writer, Sunshine Profits

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: More Uncertainty As SP500 Index Trades Close To 2,050 - Which Direction Is Next?

Stock Trading Alert originally published on May 19, 2016, 6:48 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 U.S. stock market indexes were mixed between 0.0% and +0.4% on Wednesday, as investors reacted to the FOMC Minutes release, among others. The S&P 500 index extends its fluctuations along the level of 2,050. The nearest important level of support is at around 2,030-2,040, marked by previous local lows. The next 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 a 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 negative, with index futures currently down 0.4%. The European stock market indexes have lost between 0.9% and 1.4% so far. Investors will now wait for some economic data announcements: Initial Claims, Philadelphia Fed number at 8:30 a.m., Leading Indicators at 10:00 a.m. The S&P 500 futures contract trades within an intraday downtrend, following yesterday's volatility. The nearest important level of support is at around 2,030. On the other hand, resistance level is at 2,040-2,050, among others. The market trades along its yesterday's local lows. Will it break lower and continue towards 2,000 mark?

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday downtrend. The nearest important level of support is at 4,300 mark. On the other hand, resistance level is at 4,330-4,350, among others, as we can see on th 15-minute chart:

NASDAQ 100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market remained within a short-term consolidation yesterday, as the S&P 500 index continued to fluctuate along the level of 2,050. 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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