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Paul Rejczak

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Stock Trading Alert: More Short-Term Uncertainty Following Economic Data, Earnings Releases

Stock Trading Alert originally published on October 27,  2016, 6:48 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 U.S. stock market indexes were mixed between -0.6% and +0.2% on Wednesday, as investors reacted to worse-than-expected Apple's quarterly earnings, Consumer Confidence number releases, among others. The S&P 500 index continues to trade close to its resistance level of 2,150. There has been no clear short-term direction so far. The next resistance level is at 2,170-2,180, marked by some previous local highs. On the other hand, level of support is at 2,130, and the next support level is at 2,115-2,120, marked by previous local lows. 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 positive, with index futures currently up 0.2%. The main European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: Initial Claims, Durable Orders at 8:30 a.m., Pending Home Sales number at 10:00 a.m. The S&P 500 futures contract trades within an intraday consolidation, as it continues to fluctuate along the level of 2,130. The nearest important level of resistance is at around 2,140-2,150. On the other hand, support level is at 2,120-2,130. For now, it looks like a flat correction within a short-term downtrend:

S&P500 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation. It fluctuates along the level of 4,850 today. The nearest important resistance level is at 4,880-4,900. On the other hand, support level is at 4,800-4,840, marked by previous consolidation, as we can see on the 15-minute chart:

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 2,150 mark. For now, it looks like a flat correction within a downtrend. 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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