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 main U.S. stock market indexes gained between 0.5% and 0.7% on Friday, retracing their Wednesday's move down, as investors' sentiment further improved following economic data releases, among others. The S&P 500 index has reached new record high of 2,405.77 on Tuesday. However, it failed to continue the uptrend and sold off on Wednesday, following a gap down opening of the trading session. Is last week's Thursday-Friday rebound an upward reversal or just correction within a new short-term downtrend? The Dow Jones Industrial Average closed slightly the level of 20,800, and the technology Nasdaq Composite index got closer to the level of 6,100 again. The nearest important level of support of the S&P 500 index is now at 2,370, marked by short-term local low. The next support level is at 2,350-2.355, marked by late April daily gap up, among others. The support level is also at 2,320-2,330, marked by previous local lows. On the other hand, resistance level is now at around 2,385-2,395, marked by Wednesday's daily gap down of 2,384.87-2,396.05. The resistance level is also at 2,400-2,405, marked by the above-mentioned new record high. 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 trades below its medium-term upward trend line, as we can see on the daily chart:

(Click to enlarge)

Expectations before the opening of today's trading session are virtually flat, following an overnight consolidation. The European stock market indexes have been mixed so far. There will be no new important economic data announcements today. The S&P 500 futures contract trades within an intraday consolidation, as it fluctuates along the level of 2,380. It has retraced some more of its last Wednesday's decline. The nearest important level of resistance is at around 2,385-2,390, marked by short-term local highs. The next level of resistance is at 2400-2,405, marked by topping consolidation along record high. On the other hand, support level is at around 2,370, marked by recent local high. the next level of support is at 2,340-2,345, marked by last week's local lows. The market trades within a short-term uptrend off Thursday's overnight lows. Is this a new uptrend or just an upward correction before another leg down?

(Click to enlarge)

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades within a consolidation along the level of 5.650-5,670. It has retraced its few-week-long rally to new record highs above the level of 5,700 on Wednesday. Then, it bounced off support level at around 5,550. The nearest important level of support is at around 5,.650, and the next support level is at 5,600-5,620, marked by some recent fluctuations. On the other hand, resistance level is 5,670, and the next level of resistance is at 5,700, as the 15-minute chart shows:

(Click to enlarge)

Concluding, the S&P 500 index continued its Thursday's rebound on Friday, as investors' sentiment improved. The broad stock market retraced most of its Wednesday's sell-off. Will it continue towards new record highs? Or is this just an upward correction? There have been no confirmed positive signals so far. 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

By Paul Rejczak for Safehaven.com