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Paul Rejczak

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Stock Trading Alert: More Short-Term Uncertainty As Investors React To Earnings Releases

Stock Trading Alert originally published on July 25, 2016, 6:53 AM:


 

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,210, and profit target at 2,050, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook is now neutral, following S&P 500 index breakout above last year's all-time high:

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

The main U.S. stock market indexes gained 0.3-0.5% on Friday, extending their short-term consolidation following recent rally, as investors reacted to quarterly corporate earnings, economic data releases. The S&P 500 index remains relatively close to its last Wednesday's new all-time high of 2,175.63. The nearest important level of resistance is at 2,170-2,175, and the next potential resistance level is at 2,200. On the other hand, support level is at around 2,150-2,155, marked by short-term local lows. The next important support level is at 2,130-2,135, marked by previous level of resistance. There have been no confirmed negative signals so far. However, we can see short-term overbought conditions accompanied by negative technical divergences:

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are virtually flat. The European stock market indexes have been mixed so far. The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates following Friday's move up. The nearest important level of resistance is at around 2,170. On the other hand, support level remains at 2,150-2,160, among others, as we can see on the 15-minute chart:

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades along the level of 4,650. The nearest important level of resistance is at around 4,660-4,670, marked by Friday's local high. On the other hand, support level is at 4,630-4,650. There have been no confirmed negative signals so far. However, we still can see short-term overbought conditions:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market continues to trade close to its new all-time high, as the S&P 500 index remains above 2,150 mark. We still can see short-term overbought conditions accompanied by bearish technical divergences. Therefore, we continue to maintain our speculative short position (opened on July 18th at 2,162, S&P 500 index). Stop-loss level is at 2,210 and potential profit target is at 2,050 (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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