Briefly:

Intraday trade: Our Wednesday's intraday intraday outlook has proved partly accurate. The S&P 500 index closed 0.4% higher, but it gained less than 4 points from its opening price. The index may continue to fluctuate along the level of 2,500 today. It remains above support level of the September 12 daily gap up of 2,488.95-2,490.37. 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 2,530, and profit target at 2,300, S&P 500 index).

Our intraday outlook is neutral today, 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 main U.S. stock market indexes gained between 0.3% and 1.2% on Wednesday, extending their short-term fluctuations, as investors reacted to economic data releases, tax cut plan announcement, among others. The S&P 500 index has reached new record high at the level of 2,511.75 before closing slightly below its previous all-time high. The Dow Jones Industrial Average remained slightly below last Thursday's new record high of 22,419.51. The technology Nasdaq Composite was relatively stronger than the broad stock market again. It reached new all-time high at the level of 6,472.55, as it got slightly above its last week's Monday's high. The nearest important level of resistance of the S&P 500 index remains at around 2,510, marked by record high. On the other hand, support level is still at 2,490, marked by the September 12 daily gap up of 2,488.95-2,490.37, among others. The next support level remains at 2,465-2,475, marked by the September 11 daily gap up of 2,467.11-2,474.52. The S&P 500 index continued its long-term uptrend, as it reached new record highs above the level of 2,500. It was gaining despite some short-term technical overbought conditions. The market is currently trading along new record highs, remaining within relatively narrow trading range, so those overbought conditions decrease. We still can see medium-term negative technical divergences, but will they lead to a downward correction?

Above 2,500 Mark

Expectations before the opening of today's trading session are virtually flat, with index futures currently between -0.05% and 0.0% vs. Wednesday's closing prices. The European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: the U.S. GDP number, Initial Claims, Trade Balance, Wholesale Inventories at 8:30 a.m. The market expects that the U.S. Gross Domestic Product grew 3.0% in the second quarter of 2017 (final number). The S&P 500 futures contract trades within an intraday consolidation, following yesterday's move up. The nearest important level of resistance is at around 2,510, marked by new record high. On the other hand, support level is at 2,500, and the next level of support remains at 2,485-2,490, marked by previous resistance level. The support level is also at 2,480, marked by short-term consolidation. The futures contract is slightly above 2,500 mark, as the 15-minute chart shows:

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades within an intraday consolidation after its yesterday's advance. The nearest important level of resistance is at 5,950-5,960, and the next resistance level is at 5,980-6,020. On the other hand, support level remains at around 5,900, marked by previous level of resistance, among others. The Nasdaq futures contract trades above almost three-day-long upward trend line, as we can see on the 15-minute chart:

Let's take a look at Apple, Inc. stock (AAPL) daily chart (chart courtesy of http://stockcharts.com). It rebounded following recent decline. The price bounced off support level at around $150 on Monday. But will it reverse its downtrend? Or is this just upward correction before another leg lower? There have been no confirmed positive signals so far:

Now, let's take a look at the Dow Jones Industrial Average daily chart (chart courtesy of http://stockcharts.com) again. The blue-chip index continues to fluctuate after its recent advance. It remains close to last Thursday's new record high. We can see some negative technical divergences, along with topping pattern:

Concluding, the S&P 500 index gained 0.4% on Wednesday, following a move to new record high at the level of 2,511.75. Overall, the market extended its short-term consolidation, as it closed slightly below its recent high. Is this a topping pattern or just another flat correction within an uptrend? Will the broad stock market retrace more of its September advance? We still can see medium-term overbought conditions along with negative technical divergences.

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). We decided to move our stop-loss level up for the first time on Thursday, to the level of 2,530 (from 2,510). This will be the final stop-loss for this trade. Potential profit target remains 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: 2,530
S&P 500 futures contract (December) - short position: profit target level: 2,297; stop-loss level: 2,527
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $230; stop-loss level: $253
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: opening price: $50.24; profit target level: $55.92; stop-loss level: $46.46

Thank you.

Paul Rejczak
Stock Trading Strategist
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