Stock Trading Alert: Uncertainty Following Recent Sell-Off – Will Downtrend Continue?

Posted by Paul Rejczak - Sunshine Profits

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Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,090 and profit target at 1,980, S&P 500 index)

Our intraday outlook is bearish, and our short-term outlook is bearish – (Stock Trading Alert originally published on March 12, 2015, 7:53 AM):

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): bullish

The U.S. stock market indexes lost between 0.2% and 0.6% on Wednesday, as the broad stock market slightly extended its short-term downtrend. Our yesterday’s negative intraday outlook has proved accurate. The S&P 500 index trades within November-January consolidation. The nearest important resistance level remains at around 2,060-2,065, marked by some previous local extreme levels. On the other hand, support level is at 2,020-2,025, among others, 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 0.2%. The main

European stock market indexes have been mixed so far. Investors will now wait for economic data announcements: Initial Claims, Retail Sales at 8:30 a.m., Business Inventories number at 10:00 a.m. The S&P 500 futures contract (CFD) extends its short-term consolidation today, as it fluctuates along the level of 2,040. The nearest important level of resistance is at around 2,050:

 

S&P500 15-Minute Chart
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The technology Nasdaq 100 futures contract (CFD) bounced off support level at around 4,300. The nearest important resistance level is at 4,320-4,340, marked by recent local lows. For now, it looks like a relatively flat correction within a short-term downtrend, as the 15-minute chart shows:

NASDAQ 100 Futures 15-Minute Chart
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Concluding, the broad stock market remains in a short-term downtrend, following February advance. We continue to maintain our speculative short position (opened on February 18 at 2,099.16, S&P 500 index), as we expect some more downside. We decided to lower our stop-loss level to 2,090 (S&P 500 index), just to protect our gains. Potential profit target remains at 1,980. 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.