Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,100, and profit target at 1,950, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence:

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

The main U.S. stock market indexes gained between 0.8% and 1.0% on Tuesday, retracing their recent move down, as investors reacted to economic data, quarterly earnings releases. The S&P 500 index continues to fluctuate along the level of 2,050, following February - March rally. Is this a topping pattern or just flat correction within two-month long uptrend? There have been no confirmed negative signals so far. However, we still can see technical overbought conditions. The nearest important level of resistance is at 2,080, marked by the late December high of 2,081.56. The next resistance level is at 2,100-2,120. On the other hand, support level is at 2,000-2,020, marked by previous level of resistance. The index continues to trade within a descending medium-term trading channel, as the daily chart shows:

Expectations before the opening of today's trading session are positive, with index futures currently up 0.5-0.8%. The European stock market indexes have gained 1.4-2.5% so far. Investors will wait for some economic data announcements: Producer Price Index, Retail Sales at 8:30 a.m., Business Inventories at 10:00 a.m., Crude Inventories at 10:30 a.m., Fed's Beige Book at 2:00 p.m. The S&P 500 futures contract trades within an intraday uptrend, as it extends its yesterday's advance. The nearest important level of support is at around 2,050, marked by previous resistance level. On the other hand, resistance level is at around 2,070, marked by recent local high, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract follows a similar path, as it continues its yesterday's rally. The nearest important level of support is at around 4,500. On the other hand, potential resistance level is at 4,530-4,550, marked by last week's highs. Will it continue higher, despite some short-term overbought conditions? There have been no confirmed negative signals so far:

Concluding, the broad stock market retraced its recent move down, as the S&P 500 index got back above the level of 2,050. For now, it looks like a relatively flat correction following two-month long rally. However, we can see technical overbought conditions that may lead to uptrend's reversal or downward correction. Therefore, we continue to maintain our speculative short position (opened at 2,045.56 - last week's Wednesday's opening price of the S&P 500 index). Stop-loss level is at 2,100 and potential profit target is at 1,950 (S&P 500 index). 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.

Paul Rejczak
Stock Trading Strategist
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