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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: Positive Expectations Ahead Of Economic Data Releases, But Will Stocks Continue Higher?

Stock Trading Alert originally published on September 1,  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 U.S. stock market indexes lost 0.1-0.3% on Wednesday, extending their short-term consolidation, as investors continued to hesitate following June - July rally. The S&P 500 index remains relatively close to its recent new all-time high of 2,193.81. The nearest important level of resistance is at around 2,190-2,200. On the other hand, support level is at 2,160-2,170, marked by short-term local lows. The next support level remains at 2,150. Will the market continue higher? Or is this some kind of a topping pattern before downward reversal? There have been no confirmed negative signals so far:

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are positive, with index futures currently up 0.2-0.3%. The main European stock market indexes have gained 0.1-1.1% so far. Investors will now wait for some economic data announcements: Initial Claims, Productivity number at 8:30 a.m., Construction Spending, ISM Index at 10:00 a.m. The S&P 500 futures contract trades within an intraday uptrend, as it retraces its yesterday's move down. The nearest important level of support is at around 2,160-2,170. On the other hand, resistance level remains at 2,175-2,180, marked by some recent local highs, 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 retraces its recent decline. The nearest important resistance level is at 4,800 mark. On the other hand, support level remains at 4,760-4,770, among others, as the 15-minute chart shows:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market continues to trade within a short-term consolidation, as the S&P 500 index remains relatively close to last month's record high. Will it continue its long-term uptrend following few-week-long fluctuations? Or is this a topping pattern? We still can see overbought conditions accompanied by negative 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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