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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: Mixed Expectations As Stocks Extend Their Short-Term Consolidation, Which Direction Is Next?

Stock Trading Alert originally published on October 17,  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 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 were mixed between 0.0% and +0.2% on Friday, extending their short-term fluctuations following last week's Tuesday's move down. The S&P 500 index remains close to its September lows of 2,120. The nearest important level of support is at around 2,100-2,120. On the other hand, resistance level is at around 2,140-2,150, marked by previous support level. The next resistance level is at 2,170, among others. The market continues to trade along medium-term upward trend line, as the daily chart shows:

S&P500 Daily Chart
Larger Image

Expectations before the opening of today's trading session are slightly negative, with index futures currently down 0.1-0.3%. The European stock market indexes have lost 0.4-0.8% so far. Investors will now wait for some economic data announcements: Empire Manufacturing number at 8:30 a.m., Industrial Production, Capacity Utilization at 9:15 a.m. The S&P 500 futures contract trades within an intraday consolidation, as it currently fluctuates along the level of 2,120. The nearest important level of resistance is at around 2,130-2,140. On the other hand, support level is at 2,100-2,110, marked by recent local low, as we can see on the 15-minute chart:

S&P500 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. The nearest important resistance level is at around 4,790-4,800, marked by previous support level. On the other hand, support level remains at 4,750-4,780, among others:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market fluctuated on Friday, following Thursday's rebound off support level at 2,100-2,120. Is this just a downward correction within medium-term downtrend or a new medium-term downtrend? There have been no confirmed positive signals so far. 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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