Stock Trading Alert originally sent to subscribers on September 18, 2014, 7:01 AM.

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,030 and a profit target at 1,900, S&P 500 index)

Our intraday outlook is bearish, and our short-term outlook is bearish:

Intraday (next 24 hours) outlook: bearish
Short-term (next 1-2 weeks) outlook: bearish
Medium-term (next 1-3 months) outlook: neutral
Long-term outlook (next year): bullish

The U.S. stock market indexes gained 0.1-0.2% on Wednesday, extending their short-term fluctuations, as investors reacted to FOMC’s Rate Decision announcement. The S&P 500 index got closer to its September 4 all-time high of 2,011.17. The resistance level remains at around 2,000-2,010. On the other hand, the level of support is at 1,980-1,985, marked by recent local lows. There is no clear short-term direction. We can still see negative technical divergences, accompanied by medium-term overbought conditions:

Expectations before the opening of today’s session are positive, with index futures currently up 0.3-0.4%. The European stock market indexes have gained 0.4-1.0% so far. Investors will now wait for some economic data announcements: Initial Claims, Housing Starts, Building Permits at 8:30 a.m., Philadelphia Fed index at 10:00 a.m. The S&P 500 futures contract (CFD) is in an intraday uptrend, as it gets closer to all-time highs. The nearest important resistance level is at around 2,010. On the other hand, the level of support remains at 1,990, among others:

The technology Nasdaq 100 futures contract (CFD) trades slightly below the level of 4,000, as it is relatively weaker than the broad stock market. The nearest important support level remains at around 4,050, marked by local lows, as we can see on the 15-minute chart:

Concluding, the broad stock market rebounded following recent move down. It currently trades close to early September all-time high. However, we remain bearish, expecting a downward correction or uptrend reversal. Based on my experience, medium-term divergences seem more important than the lack of clarity for the short term. Therefore, we continue to maintain our speculative short position. The stop-loss is at the level of 2,030 and potential profit target is at 1,900 (S&P 500 index). 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.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts