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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: 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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