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 lost between 1.0% and 1.5% on Thursday, as investors took profits off the table following over month-long move up. The S&P 500 index continues to fluctuate along the level of 2,050. It remains close to its last year's November - December local highs. The nearest important level of resistance is at around 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, among others. There have been no confirmed negative signals so far. However, we still can see technical overbought conditions. The index continues to trade within a slightly 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 0.5-0.7%. The European stock market indexes have gained 0.6-1.0% so far. Investors will now wait for the Wholesale Inventories data release at 10:00 a.m. The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its yesterday's decline. The nearest important level of support is at around 2,025-2,030, marked by local low. On the other hand, resistance level remains at 2,060-2,070, marked by recent local highs. The market extends its short-term consolidation. Is this a topping pattern or just flat correction within an uptrend?

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. The nearest important level of resistance is at 4,530-4,550, marked by recent local highs. On the other hand, support level is at 4,450, marked by yesterday's daily low, as we can see on the 15 minute chart:

Concluding, the broad stock market retraced some more of its over month-long uptrend yesterday, as investors took profits off the table. For now, it looks like a consolidation following last weeks' 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 - 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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