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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 2,180, and profit target at 2,020, 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 lost between 0.1% and 0.6% on Friday, as investors reacted to economic data, quarterly earnings releases, among others. The S&P 500 index continues to trade below 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 0.1-0.3%. The European stock market indexes have lost 0.4-0.8% so far. Investors will now wait for some economic data announcements: Personal Income, Personal Spending, Core PCE Price Index at 8:30 a.m., Chicago PMI number at 10:00 a.m. The S&P 500 futures contract trades within an intraday consolidation, following a rebound off support level at around 2,100-2,110. The nearest important level of resistance remains at 2,140-2,150, marked by some previous local highs. There have been no confirmed positive signals so far.

S&P500 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades within an intraday consolidation, after rebounding off support level at 4,780-4,800. The nearest important resistance level is at 4,820-4,850, marked by previous support level, as we can see on the 15-minute chart:

NASDAQ100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market extended its short-term consolidation on Friday, as the S&P 500 index remained below its resistance level of 2,150. 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). However, on Friday we decided to move our stop-loss level from 2,210 down to 2,180 (S&P 500 index). We also decided to move our potential profit target level from 2,050 down to 2,020 (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.

There will be no Stock Trading Alert on Tuesday, November 1. We apologize for inconvenience.

Thank you.

 

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