Negative Expectations Following Yesterday's Retreat

August 20, 2015

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,140, and profit target at 1,980, S&P500 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 0.7-0.9% on Wednesday, retracing their recent move up, as investors reacted to the FOMC's Minutes release, among others. Our yesterday's bearish intraday outlook has proved accurate. The S&P 500 index remains within half-year long medium-term consolidation, as it continues to fluctuate along the level of 2,100. The nearest important level of resistance is at around 2,100-2,115, marked by local highs. On the other hand, support level is at 2,040-2,060, marked by some previous local lows. 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 negative, with index futures currently down 0.7%. The main European stock market indexes have lost 0.4-0.8% so far. Investors will now wait for some economic data announcements: Initial Claims at 8:30 a.m., Existing Home Sales, Philadelphia Fed, Leading Indicators at 10:00 a.m. The S&P 500 futures contract (CFD) trades within an intraday downtrend, as it continues its recent move down. The nearest important level of resistance is at 2,080-2,100, and support level is at 2,040-2,050, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) follows a similar path, as it continues its short-term downtrend. The nearest important level of resistance is at around 4,500. On the other hand, support level is at 4,430-4,450, as we can see on the 15-minute chart:

Concluding, the broad stock market retraced its recent move up yesterday, as it extended its short-term consolidation. 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 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

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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