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 U.S. stock market indexes gained 0.8-0.9% on Thursday, extending their short-term uptrend, as investors reacted to economic data, quarterly corporate earnings releases, among others. The S&P 500 index broke slightly above its recent consolidation along the level of 2,350. It is currently trading 1.8% below its March 1 all-time high of 2,400.98. Is this a new downtrend or just relatively shallow downward correction before another medium-term leg up? The Dow Jones Industrial Average got close to the level of 20,600 again, and relatively stronger technology Nasdaq Composite index broke above 5,900 mark again, as it got close to its early April record high. The nearest important level of support of the S&P 500 index is now at around 2,350, marked by previous resistance level. The next support level is at 2,320-2,330, marked by previous short-term consolidation. The support level is also at around 2,270-2,280. On the other hand, the nearest important level of resistance is now at 2,365-2,370, marked by some previous local highs. The next resistance level is at 2,380-2,400, marked by record high, among others. We can see some short-term volatility following five-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 trading below its medium-term upward trend line, as we can see on the daily chart:

Expectations before the opening of today's trading session are mixed, with index futures currently between 0.0% and +0.2%. The European stock markets have been mixed so far. Investors will now wait for the Existing Home Sales number at 10:00 a.m. The market expects that it was at 5.58M in March. Investors will also wait for more quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday consolidation following yesterday's advance. The nearest important level of resistance is at around 2,355-2,360, marked by local highs. The next resistance level is at 2,365-2,375, marked by previous local highs. On the other hand, support level is now at around 2,350, marked by previous level of resistance. The next support level is at 2,330, marked by recent local lows. Will the market extend its short-term uptrend? Or is this just upward correction before another leg down?

The technology Nasdaq 100 futures contract is relatively stronger than the broad stock market, as it currently trades closer to its early April record high. The nearest important support level is at around 5,440, marked previous level of resistance. The next level of support remains at 5,380-5,400, marked by short-term local lows. On the other hand, resistance level is at 5,480, marked by all-time high. There have been no confirmed negative signals so far. However, we can see some short-term overbought conditions:

Concluding, the S&P 500 index broke above its short-term consolidation yesterday, as investors reacted to quarterly corporate earnings releases, among others. Is this a new uptrend or just another upward correction? The broad stock market remains within an over-month-long consolidation following November-March rally. The index is currently trading below five-month-long medium-term upward trend line. There have been no confirmed short-term positive 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
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