S&P500 Index At 2100 Again…Will It Continue Higher?

July 7, 2016

In our opinion, speculative short positions are favored (with stop-loss at 2,140, and profit target at 2,100 on the S&P500 index).

Our intraday outlook is now bearish, and our short-term outlook is bearish. Our medium-term outlook remains bearish, as the S&P500 index extends its lower highs, lower lows sequence:

Intraday outlook (next 24 hours): bearish

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

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

Long-term outlook (next year): neutral

The US stock market indexes gained between 0.4% and 0.8% on Wednesday, extending their short-term fluctuations following late June rally. The S&P 500 index remains close to the level of 2,100. The nearest important level of resistance is at around 2,110-2,120, marked by last month's local highs. The next resistance level is at 2,130-2,135, marked by last year's all-time high. On the other hand, support level is at around 2,080-2,085, marked by previous level of resistance, and the next level of support is at 2,050-2,070. Last year's highs along the level of 2,100 continue to act as medium-term resistance level. Is this some long-term topping pattern or just medium-term consolidation following a rebound off February low?

Expectations before the opening of today's trading session are virtually flat, with index futures currently down 0.1%. The European stock market indexes have gained 1.1-1.4% so far. Investors will now wait for some economic data announcements: ADP Employment Change number at 8:15 a.m., Initial Claims at 8:30 a.m. The S&P500 futures contract trades within an intraday consolidation, following yesterday's move up. The nearest important level of resistance is at around 2,095-2,100. On the other hand, support level is at around 2,070-2,080, marked by recent consolidation, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades close to the resistance level of 4,450, following breakout above 4,400 mark. Will it continue higher? For now, it looks like relatively flat correction within a short-term uptrend:

Concluding, the broad stock market extended its short-term fluctuations on Wednesday, as the S&P 500 index bounced off support level at around 2,080. We still can see short-term overbought conditions accompanied by bearish technical divergences. Therefore, we continue to maintain our speculative short position (opened at around 2,092 - Tuesday's average opening price of the S&P500 index). Stop-loss level is at 2,140 and potential profit target is at 2,000 (S&P500 index). You can trade S&P 500 index using futures contracts (S&P 500 futures contract - SP, E-mini S&P500 futures contract - ES) or an ETF like the SPDR S&P500 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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