Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,410, and profit target at 2,200, S&P 500 index).
Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains 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 -0.3% and 0.0% on Wednesday, extending their short-term consolidation, as investors reacted to economic data including the FOMC Rate Decision announcement, quarterly corporate earnings releases. The S&P 500 index remains close to its March 1 all-time high of 2,400.98. It has closed around 0.5% below that record high on Wednesday. Will the broad stock market index continue its eight-year-long bull market? The Dow Jones Industrial Average remained below the level of 21,000, and the technology Nasdaq Composite index fluctuated slightly below the level of 6,100, along its new record high. The nearest important level of support of the S&P 500 index remains at 2,375-2,380, marked by last Tuesday's daily gap up of 2,376.98-2,381.15. The next support level is at 2,355-2,370, marked by last Monday's daily gap up. The support level is also at around 2,350, marked by short-term consolidation. On the other hand, the nearest important level of resistance is at 2,400, marked by record high, among others. We can see some volatility following five-month-long rally off last year's November low at around 2,100. Is this a topping pattern before medium-term downward reversal? The uptrend accelerated on March 1 and it looked like a blow-off top pattern accompanied by some buying frenzy. The S&P 500 index is currently trading along its medium-term upward trend line, as we can see on the daily chart:
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Expectations before the opening of today's trading session are positive, with index futures currently up 0.3%. The main European stock market indexes have gained 0.5-0.9% so far. Investors will now wait for more quarterly corporate earnings releases, along with some economic data announcements: Initial Claims, Productivity, Trade Balance at 8:30 a.m., Factory Orders at 10:00 a.m. The market expects that the Initial Claims were at 250,000 last week, and Factory Orders grew 0.4% in March. The S&P 500 futures contract trades within an intraday uptrend, as it retraces its recent move down. It remains within a short-term consolidation following last week's Monday rally. The nearest important level of support remains at around 2,375-2,380, marked by short-term local lows. The next support level is at 2,365, marked by last week's consolidation. On the other hand, resistance level is at around 2,390-2,400, marked by March topping consolidation, and an all-time high slightly above 2,400 mark. Will the market break above two-month long consolidation? Or is this just another upward correction? We can see some medium-term negative technical divergences, but will they lead to a downward correction?
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The technology Nasdaq 100 futures contract remains relatively stronger than the broad stock market, as it currently trades just 0.3-0.4% below its record high of around 5,640, following better-than-expected quarterly corporate earnings releases. The nearest important support level is at around 5,600, marked by previous level of resistance. The next support level is at 5,575, marked by short-term local lows. The support level is also at 5,540-5,560, marked by previous consolidation. On the other hand, level of resistance is at around 5,640-5.650. There have been no confirmed negative signals so far. However, we can see short-term overbought conditions:
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Concluding, the S&P 500 index extended its short-term consolidation on Wednesday, as it continued to trade just 0.5% below its early March all-time high. The broad stock market remains relatively weaker than the record-breaking technology Nasdaq Composite index. Is this a short-term topping pattern or just quick profit-taking action before another leg up? Will the broad stock market continue towards new record highs? The index is currently trading along its five-month-long medium-term upward trend line. There have been no confirmed negative signals so far. However, we still can see medium-term negative technical divergences. Therefore, we continue to maintain our speculative short position (opened on February 15 at 2,335.58 - opening price of the S&P 500 index). Stop-loss level is at 2,410 and potential profit target is at 2,200 (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.
To summarize: short position in S&P 500 index is justified from the risk/reward perspective with the following entry prices, stop-loss orders and profit target price levels:
S&P 500 index - short position: profit target level: 2,200; stop-loss level: 2,410
S&P 500 futures contract (June) - short position: profit target level: 2,197; stop-loss level: 2,407
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $220; stop-loss level: $241
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: profit target level: $15.47; stop-loss level: $12.98
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