Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,410, and profit target at 2,200, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains neutral, following S&P 500 index breakout above last year's all-time high:

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

The main U.S. stock market indexes were mixed between 0.0% and +0.2% on Monday, extending their short-term consolidation, as investors reacted to quarterly corporate earnings, economic data releases. The S&P 500 index remains very close to its March 1 all-time high of 2,400.98, following recent move up. The Dow Jones Industrial Average continued to trade slightly above the level of 21,000, and the technology Nasdaq Composite index fluctuated along its new record high above the level of 6,100. Will the broad stock market index continue its eight-year-long bull market? The nearest important level of support of the S&P 500 index is now at 2,390, marked by short-term local low. The next support level remains at 2,375-2,380, marked by the April 25 daily gap up of 2,376.98-2,381.15. The support level is also at 2,355-2,370, marked by the April 24 daily gap up. On the other hand, the nearest important level of resistance is at 2,400, marked by record high, among others. We can see some volatility following six-month-long rally off last year's November low at around 2,100. Is this a topping pattern before medium-term downward reversal? The uptrend accelerated on March 1 and it looked like a blow-off top pattern accompanied by some buying frenzy. The S&P 500 index is currently trading along its medium-term upward trend line, as we can see on the daily chart:

Expectations before the opening of today's trading session are slightly positive, with index futures currently up 0.1-0.2%, following an overnight consolidation. The main European stock market indexes have gained 0.3-0.5% so far. Investors will wait for more quarterly corporate earnings releases, along with some economic data announcements: Wholesale Inventories, JOLTS - Job Openings number at 10:00 a.m. The market expects that Wholesale Inventories fell 0.1% in March. The S&P 500 futures contract trades within an intraday uptrend, as it extends its short-term fluctuations along the level of 2,390-2,400. The nearest important level of support is now at around 2,390, marked by some previous local highs. The next support level remains at 2,375-2,380, marked by previous short-term local lows. The support level is also at 2,365, marked by previous consolidation. On the other hand, resistance level is at around 2,400, marked by March topping consolidation, and an all-time high slightly above 2,400 mark. Will the market break above two-month long consolidation? Or is this just another upward correction? We can see some medium-term negative technical divergences, but will they lead to a downward correction?

The technology Nasdaq 100 futures contract remains relatively stronger than the broad stock market, as it currently trades along its new record high of around 5,660, following better-than-expected quarterly corporate earnings releases. The nearest important support level is at around 5,630-5,640, marked by recent fluctuations. The next support level is at 5,600, marked by previous level of resistance. The support level is also at 5,575, marked by some previous short-term consolidation. On the other hand, level of resistance is at around 5.660. There have been no confirmed negative signals so far. However, we can see short-term overbought conditions:

Concluding, the S&P 500 index remained very close to its early March all-time high on Monday, as investors reacted to Sunday's French presidential elections outcome, among others. The broad stock market is still relatively weaker than the record-breaking technology Nasdaq Composite index. Will the broad stock market continue towards new record highs? The index is currently trading along its six-month-long medium-term upward trend line. There have been no confirmed negative signals so far. However, we still can see medium-term negative technical divergences. Therefore, we continue to maintain our speculative short position (opened on February 15 at 2,335.58 - opening price of the S&P 500 index). Stop-loss level is at 2,410 and potential profit target is at 2,200 (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.

To summarize: 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:

S&P 500 index - short position: profit target level: 2,200; stop-loss level: 2,410
S&P 500 futures contract (June) - short position: profit target level: 2,197; stop-loss level: 2,407
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $220; stop-loss level: $241
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: profit target level: $15.47; stop-loss level: $12.98

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts