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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: Positive Expectations Following Last Week's Rally, But Will The Market Continue Higher?

Stock Trading Alert originally published on July 11, 2016, 6:55 AM:


 

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,140, and profit target at 2,100, S&P 500 index).

Our intraday outlook is now bearish, and our short-term outlook is bearish. Our medium-term outlook remains bearish:

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 U.S. stock market indexes gained 1.4-1.5% on Friday, extending their short-term uptrend, as investors reacted to monthly jobs data release, among others. The S&P 500 index got close to its last year's all-time high of 2,134.72. The nearest important level of resistance is at around 2,130-2,135, and the next potential resistance level is at 2,150. On the other hand, support level is at 2,110-2,120, marked by previous level of resistance. The next important level of support is at 2,100. Will the broad stock market break above its last year's all-time high? Or is this still just medium-term consolidation? There have been no confirmed negative signals so far. However, we can see overbought conditions accompanied by negative technical divergences:

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are positive, with index futures currently up 0.4-0.5%. The European stock market indexes have gained 0.8-1.2% so far. The S&P 500 futures contract trades within an intraday consolidation following recent move up. The nearest important level of resistance is at around 2,130, and support level remains at 2,100, among others. There have been no confirmed negative signals so far. However, there are some short-term overbought conditions:

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades within an intraday consolidation along the level of 4,540. The nearest important level of support remains at around 4,500, and resistance level is at 4,540-4,550, as we can see on the 15-minute chart:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market continued its rally on Friday, as the S&P 500 index got close to last year's all-time high. Will it break higher? We still can see short-term overbought conditions accompanied by bearish technical divergences. Therefore, we continue to maintain our speculative short position (opened at around 2,092 - last Tuesday's average opening price of the 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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