Briefly:

Intraday trade: Our yesterday's neutral intraday outlook has proved accurate. The S&P 500 index extended its short-term fluctuations, as it traded within relatively narrow daily trading range. The broad stock market index may continue to fluctuate today. There is no clear short-term direction. Therefore, we prefer to be out of the market, avoiding low risk/reward ratio trades.

Medium-term trade: In our opinion, short position is favored (opened on June 5 at 2,437.83, with stop-loss at 2,510, and profit target at 2,300, S&P 500 index).

Our intraday outlook is neutral, and our short-term outlook is bearish, as we expect downward correction. Our medium-term outlook remains bearish:

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

The U.S. stock market indexes were mixed between -0.1% and +0.1% on Thursday, extending their short-term fluctuations, as investors reacted to economic data announcements, news concerning hurricane 'Irma', among others. The S&P 500 index continues to trade around 1% below the August 8 all-time high of 2,490.87. The Dow Jones Industrial Average extended its fluctuations along the level of 21,800 yesterday, and the technology Nasdaq Composite index gained 0.1%, as it got closer to 6400 mark. The nearest important level of resistance of the S&P 500 index is at around 2,470-2,475, marked by Tuesday's daily gap down of 2,471.97-2,473.85. The next resistance level is at 2,480-2,490, marked by recent local high and the above-mentioned August record high. On the other hand, support level is at around 2,445, marked by Tuesday's daily low. The next level of support is at around 2.430-2,435, marked by previous daily gap up of 2,430.58-2,433.67 and last week's Wednesday's daily low. The broad stock market continues to trade within an over-month-long consolidation following November-July uptrend. Will it continue higher? Or is this some medium-term topping pattern before downward reversal?

Negative Expectations

Expectations before the opening of today's trading session are negative, with index futures currently down 0.3% vs. their Thursday's closing prices. The European stock market indexes have lost 0.2-0.4% so far. Investors will now wait for the Wholesale Inventories number release at 10:00 a.m. The market expects that it grew 0.4% in July. The S&P 500 futures contract trades within an intraday downtrend, as it extends its overnight decline. However, it continues to fluctuate within a short-term consolidation. The nearest important level of support is at around 2,455, marked by recent local lows. The next support level is at 2,445-2,450. On the other hand, level of resistance is at 2,465-2,470, marked by some short-term local highs. The next resistance level is at 2,475-2,480. The futures contract trades below its slightly descending downward trend line, as we can see on the 15-minute chart:

Nasdaq Continues Sideways

The technology Nasdaq 100 futures contract trades within an intraday consolidation following overnight move down. It continues to fluctuate after Tuesday's sell-off and a rebound off support level. The nearest important level of resistance remains at around 5,970-5,990, marked by recent consolidation. The next resistance level is at 6,000-6,020, marked by new record high. Will the Nasdaq futures contract bounce off its short-term upward trend line?

Concluding, the S&P 500 index remained unchanged on Thursday, as investors continued to hesitate following recent volatility. The broad stock market extends its short-term fluctuations, as it trades along the level of 2,460. Will the uptrend continue following last week's rebound off support level? There have been no confirmed short-term negative signals so far. However, we still can see some medium-term overbought conditions along with negative technical divergences.

Therefore, we continue to maintain our medium-term short position (opened at 2,437.83 on June 5 - opening price of the S&P 500 index). Stop-loss level is at 2,510 and potential profit target is at 2,300 (S&P 500 index). One 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: medium-term 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:

Intraday trade:

No intraday position is justified from the risk/reward perspective today.

Medium-term trade:

S&P 500 index - short position: profit target level: 2,300; stop-loss level: 2,510
S&P 500 futures contract (September) - short position: profit target level: 2,297; stop-loss level: 2,507
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $230; stop-loss level: $251
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: opening price: $12.56; profit target level: $13.98; stop-loss level: $11.82

Thank you.

Paul Rejczak
Stock Trading Strategist
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