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Paul Rejczak

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: Stocks Extended Their Rebound On Friday - Will They Continue Higher?

Stock Trading Alert originally published on May 23, 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 U.S. stock market indexes gained 0.4-1.1% on Friday, retracing some of their recent move down, as investors reacted to economic data announcements, among others. The S&P 500 index continues to trade along the level of 2,050, following a rebound off support level at around 2,000-2,020. The nearest important level of support is at around 2,030-2,040. On the other hand, the nearest important level of resistance is at 2,050-2,060, marked by recent local highs. The next resistance level is at 2,070-2,085, marked by last week's local 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 slightly negative, with index futures currently down 0.1-0.2%. The European stock market indexes have lost 0.3-1.1% so far. The S&P 500 futures contract trades within an intraday consolidation, following Friday's move up. The nearest important resistance level is at 2,050-2,050. On the other hand, support level remains at around 2,040, and the next support level is at 2,020-2,030, marked by recent local lows. For now, it looks like a relatively flat correction within a short-term uptrend off last week's local lows. There have been no confirmed negative signals so far:

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation along the level of 4,350. The nearest important level of resistance is at around 4,370-4,380. On the other hand, support level remains at 4,300-4,320, among others, as we can see on the 15-minute chart:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market extended its short-term move up on Friday, following last week's move down towards 2,000 mark. The index is still relatively close to last year's medium-term highs along the level of 2,100 and continues to trade slightly above 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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