Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,435 price level, with 4,520 as a stop-loss and 4,200 as a price target.

The broad stock market extended its uptrend last week, but this morning it is poised to open lower. Is a short-term correction looming?

Stocks were extending an eleven-year-long uptrend last week, as the DJIA and the S&P 500 indexes reached new record highs. Will this advance continue even further despite the Fed’s growing tapering fears? Tomorrow we will have a speech from Fed Chair Jerome Powell, and the markets may be getting more volatile ahead of that event.

The S&P 500 gained just 0.16% on Friday as it extended its short-term uptrend after breaking above the 4,450 price level earlier in the week. The market reached a new record high at 4,468.37! Bulls are in full control, but we can see some negative technical divergences that may signal a coming weakness.

The broad stock market broke above its consolidation recently. The nearest important support level is at 4,430, and the next support level is at 4,400. The S&P 500 index continues to trade above its three-month-long upward trend line, but it is still below the month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

S&P 500 Remains at the Medium-Term Trend Line

The S&P 500 index continues to trade along its medium-term upward trend line. The market will most likely break below that trend line and trade sideways for some time. For now, however, it just keeps moving along the line, as we can see on the weekly chart:

Apple Struggles

Apple stock got even closer to the July 15 record high of $149.78, as it gained 0.14% on Friday. Will it break above the resistance level of $150 and the almost month-old high? That would be bullish for the broad stock market, but a downward reversal may be expected here.

Conclusion

The S&P 500 index continued its over-eleven-year-long bull market last week. On Friday it reached another new record high of 4,468.37 – 6.6 points above Thursday’s daily high.

Here’s the breakdown:

• The market seems overbought and poised for a correction.
• Therefore, we decided to open a speculative short position on Thursday.
• We are expecting a 5% or bigger correction from the current levels.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,435 price level, with 4,520 as a stop-loss and 4,200 as a price target.

Thank you.

Paul Rejczak,

Stock Trading Strategist

Sunshine Profits: Effective Investments through Diligence and Care