Mixed Expectations As New Month Starts - Which Direction Is Next?

August 3, 2015

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,140, and profit target at 1,980, S&P 500 index)

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

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): bullish

The U.S. stock market indexes lost 0.2-0.3% on Friday, extending their short-term fluctuations, as investors remained uncertain following recent move up. The S&P 500 index trades along the level of 2,100. The nearest important level of resistance is at 2,120, and the next resistance level is at 2,130-2,135, marked by late May all-time high of 2,134.72. On the other hand, support level remains at around 2,090-2,100. There have been no confirmed negative signals so far, however, we still can see negative medium-term technical divergences:

Expectations before the opening of today's trading session are slightly negative, with index futures currently down 0.1%. The main European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: Personal Income, Personal Spending, PCE - Prices Core number at 8:30 a.m., ISM Index, Construction Spending at 10:00 a.m. The S&P 500 futures contract (CFD) trades within an intraday consolidation, as it extends short-term uncertainty. The nearest important level of resistance is at around 2,105-2,110, and support level is at 2,090, among others, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) trades within a similar intraday consolidation, following Friday's volatile trading session. The nearest important level of resistance is at around 4,600, and support level is at 4,530-4,550, as we can see on the 15-minute chart:

Concluding, the broad stock market extended its short-term consolidation on Friday, as investors continued to hesitate following recent move up. There have been no confirmed medium-term negative signals so far. However, we continue to maintain our speculative short position (2,098.27, S&P 500 index), as we expect a medium-term downward correction or an uptrend reversal. Stop-loss is at 2,140, and potential profit target is at 1,980. 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.


Courtesy of SunshineProfits.com

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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