Indexes Extend Their Move Up – New Trend Or Still Just A Rebound?

August 14, 2014

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 1,970 and a profit target at 1850, S&P500 Index)

Our intraday outlook is bearish, and our short-term outlook remains bearish:

Intraday (next 24 hours) outlook: bearish

Short-term (next 1-2 weeks) outlook: bearish

Medium-term (next 1-3 months) outlook: neutral

Long-term outlook (next year): bullish

The U.S. stock market indexes gained between 0.6% and 1.1% on Wednesday, extending their recent move up, as investors bet that stocks would resume their long-term uptrend following a downward correction. The S&P500 index reached 50% retracement level of the downtrend at 1948.1. Retracement is a temporary price movement in the opposite direction of the previous trend. The last important retracement level is Fibonacci’s golden ratio of 61.8%. In this case the 61.8% retracement of the recent sell-off is at the level of 1958.3. The nearest important resistance level is at around 1,950, and the next level of resistance is at 1970-1990, marked by the July 24 all-time high of 1991.39, among others. On the other hand, the support is at 1930-1940, marked by recent local highs. It is still a correction within short-term downtrend, however, a bullish scenario cannot be excluded here, as the market may resume its long-term uptrend:

Expectations before the opening of today’s session are virtually flat. The main European stock market indexes have been mixed so far. Investors will now wait for the Initial Claims data release at 8:30 a.m. The S&P500 futures contract (CFD) is in a relatively narrow intraday trading range, as it fluctuates slightly below the level of 1,950. The support level is at around 1940, marked by recent local high. For now, it looks like a correction following late July – early August sell-off, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract (CFD) is relatively stronger, as it trades just below its July consolidation. The resistance level is at around 3950, and the next level of resistance is at 3980-4000. On the other hand, the level of support is at 3915, marked by previous resistance, as the 15-minute chart shows:

Concluding, the broad stock market extends its recent move up. However, it continues to look like a correction within a short-term downtrend, as the S&P500 index tests the resistance marked by 50% retracement of the move down. We remain cautiously pessimistic, maintaining our speculative short position. The stop-loss remains at 1970, and a profit target at 1850 (S&P 500 Index). It is important to set an exit price level in case some events cause the price to move in the unlikely direction. Nobody can be correct about any market 100% of the time, and having safety measures in place helps to limit potential losses while letting the gains grow.

There will be no Stock Trading Alert tomorrow, Friday, August 15. We apologize for inconvenience.

Thank you.

Paul Rejczak

Stock Trading Strategist

Stock Trading Alerts

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All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Paul Rejczak is a stock market strategist, who has been known for quality of his technical and fundamental analysis since the late nineties. He is interested in forecasting market behavior based on both traditional and innovative methods of technical analysis. Paul has made his name by developing mechanical trading systems. Paul is the author of Sunshine Profits’ premium service for stock traders: Stock Trading Alerts.

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