Positive Expectations As Investors React To Greece Debt Deal News

June 22, 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 US stock market indexes lost 0.4-0.6% on Friday, as investors reacted to news concerning Greece debt crisis, among others. The S&P 500 index remains relatively close to its May 20 all-time high of 2,134.72. The nearest important resistance level is at around 2,130-2,135. On the other hand, level of support is at 2,100. There have been no confirmed negative signals so far. However, we can see negative technical divergences:

Expectations before the opening of today's trading session are positive, with index futures currently up 0.6-0.8%. The main European stock market indexes have gained 1.1-3.3% so far. Investors will now wait for the Existing Home Sales number release at 10:00 a.m. The S&P 500 futures contract (CFD) trades within an intraday uptrend, following Friday's move down. The nearest important level of resistance is at around 2,115-2,120, marked by local highs, and support level is at 2,100, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) follows a similar path, as it extends its short-term uptrend. The nearest important level of resistance is at 4,550, and support level remains at around 4,500, as we can see on the 15-minute chart:

Concluding, the broad stock market remains relatively close to its record highs, as investors react to economic news announcements. However, we continue to maintain our speculative short position (2,098.27, S&P 500 index), as we expect a 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.

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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