Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,510, and profit target at 2,300, 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 between 0.1% and 0.5% on Monday, as investors' sentiment remained bullish following July advance. The S&P 500 index has reached new all-time high at the level of 2,484.04 on July 27, before reversing slightly lower. It continued to fluctuate last week, as it traded slightly below that new record high. The Dow Jones Industrial Average has reached yet new record high at the level of 22,121.2 yesterday. The blue chips index remained relatively stronger than the broad stock market. The technology Nasdaq Composite gained 0.5% on Monday, as it extended its short-term consolidation following July 27 move down. The nearest important support level of the S&P 500 index is at 2,460-2,465, marked by July 19 daily gap up of 2,460.92-2,463.85. The next level of support is at 2,450-2,455, marked by June 19 local high. The support level is also at 2,430-2,435, marked by July 12 daily gap up of 2,429.30-2,435.75. On the other hand, level of resistance remains at 2,480-2,485, marked by all-time high. The next resistance level is at 2,500 mark. There have been no confirmed negative signals so far. However, we can see medium-term overbought conditions and negative technical divergences. The S&P 500 index trades within a consolidation along new record high, as we can see on the daily chart:

Close To Record High

Expectations before the opening of today's trading session are virtually flat, with index futures currently between -0.1% and 0.0% vs. their Monday's closing prices. The European stock market indexes have been mixed so far. Investors will now wait for the JOLTS Job Openings number release at 10:00 a.m. The market expects that JOLTS Job Openings were at 5.74M in June. Investors will also wait for some quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of yesterday's intraday move down. The market continues to trade within a short-term consolidation, as it remains close to record high. The nearest important resistance level is at around 2,480-2,500. On the other hand, support level is at 2,450-2,460, marked by some short-term local lows. The next support level remains at 2,440, among others. There have been no confirmed negative signals so far. But will the uptrend continue despite some negative technical divergences and medium-term overbought conditions?

Nasdaq Continues Higher

The technology Nasdaq 100 futures contract extends its short-term uptrend, as it currently trades close to recent local highs along the level of 5,940-5,950. The nearest important level of resistance is at around 5,950-6,000. On the other hand, support level is at 5,850-5,870, marked by short-term local lows, as the 15-minute chart shows:

Concluding, the S&P 500 index got closer to its July 27 record high on Monday, as investors' sentiment remained bullish. The broad stock market extends its few-week-long consolidation. For now, it looks like a flat correction within an uptrend. But will uptrend extend even further? There have been no confirmed negative signals so far. However, we still can see negative technical divergences, along with medium-term overbought conditions.

Therefore, we continue to maintain our speculative short position (opened at 2,437.83 on June 5 - opening price of the S&P 500 index). Stop-loss level is at 2,510 and potential profit target is at 2,300 (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: 2,300; stop-loss level: 2,510
S&P 500 futures contract (September) - short position: profit target level: 2,297; stop-loss level: 2,507
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $230; stop-loss level: $251
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: opening price: $12.56; profit target level: $13.98; stop-loss level: $11.82

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts