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Paul Rejczak

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Stock Trading Alert: Sentiment Improves Following Fed's Rate Decision, Will The Uptrend Continue?

Stock Trading Alert originally published on September 22,  2016, 6:55 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 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 0.9-1.1% on Wednesday, as investors reacted to FOMCRate Decision announcement. The S&P 500 index broke above its short-term consolidation along the level of 2,160. However, it still remains slightly below its two-month-long consolidation following June - July rally. The nearest important level of resistance is at around 2,170, marked by the daily gap down of 2,169.08-2,177.49. On the other hand, support level is at 2,150, marked by previous level of resistance. The next important support level is at around 2,120-2,130. Is this a new uptrend or just upward correction following the early September move down?

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are positive, with index futures currently up 0.3%. The European stock market indexes have gained 1.3-2.0% so far. Investors will now wait for some economic data announcements: Initial Claims at 8:30 a.m., FHFA Housing Price Index at 9:00 a.m., Existing Home Sales at 10:00 a.m. The S&P 500 futures contract trades within an intraday uptrend, as it extends its yesterday's rally. The nearest important level of resistance is at around 2,160-2,165, marked by previous local high. The next important level of resistance is at 2,170-2,180. There have been no confirmed negative signals so far. The market trades within a short-term uptrend, as we can see on the 15-minute chart:

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract is relatively stronger than the broad stock market, as it trades close to new all-time high. The nearest important support level is at around 4,800-4,820, marked by previous level of resistance. There have been no confirmed negative signals so far. However, we can see some short-term overbought conditions:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market broke above its short-term consolidation yesterday, following Fed's Rate Decision release. The S&P 500 index retraced more of its early September decline, as it broke above its recent consolidation. However, 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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