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Paul Rejczak

Paul Rejczak

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: Uptrend's Reversal Or Just Short-Term Downward Correction?

Stock Trading Alert originally published on June 13, 2016, 6:43 AM:


 

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,140, and profit target at 2,000, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence:

Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): bearish
Long-term outlook (next year): neutral

The main U.S. stock market indexes lost between 0.7% and 1.1% on Friday, retracing some of their recent move down, as investors took short-term profits off the table, among others. The S&P 500 index got back slightly below the level of 2,100. The nearest important level of resistance is at around 2,110-2,120, marked by April's local high. The next resistance level is at around 2,130, marked by last year's all-time high of 2,134.72. On the other hand, support level is at 2,085, marked by previous consolidation. The next important support level is at around 2,070. 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
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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 0.7-1.3% so far. The S&P 500 futures contract trades within an intraday downtrend, as it continues its Friday's decline. The nearest important level of resistance is at around 2,095-2,100. On the other hand, support level is at 2,080-2,085. There have been no confirmed positive signals so far. However, we can see some short-term oversold conditions:

S&P500 Futures 15-Minute Chart
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The technology Nasdaq 100 futures contract follows a similar path, as it currently trades below the level of 4,450, after its Friday's breakdown below support level of 4,500. The nearest important level of resistance is at around 4,460, marked by previous support level. On the other hand, support level is at around 4,400-4,430, among others:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market retraced some of its last weeks' advance on Friday, as investors took short-term profits off the table, among others. We still can see technical overbought conditions that may lead to uptrend's reversal or downward correction. Therefore, we continue to maintain our speculative short position (opened on June 1 at 2,093.94 - S&P 500 index). Stop-loss level is at 2,140 and potential profit target is at 2,000 (S&P 500 index). You can trade S&P 500 index using futures contracts (S&P 500 futures contract - SP, E-mini S&P 500 futures contract - ES) or an ETF like the SPDR S&P 500 ETF - SPY. It is always important to set some exit price level in case some events cause the price to move in the unlikely direction. Having safety measures in place helps limit potential losses while letting the gains grow.

Thank you.

 

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