Stock Trading Alert: Friday’s Selloff – New Downtrend Or Just A Short-Term Pullback?

April 7, 2014

Briefly: In our opinion no speculative positions are justified.

Our intraday outlook is neutral, and our short-term outlook is now neutral, following Friday’s move down:

Intraday (next 24 hours) outlook: neutral

Short-term (next 1-2 weeks) outlook: neutral
Medium-term (next 1-3 months) outlook: neutral
Long-term outlook (next year): bullish

The U.S. stock market indexes lost between 1.0% and 2.7% on Friday, as investors reacted negatively to monthly jobs data release. However, the S&P 500 index has managed to reach yet another new intraday all-time high at  1,897.28, before going down to its daily low at 1,863.26. The nearest important resistance remains at 1,880-1,900, and the support is at 1,840-1,850, marked by March local lows, among others. For now, it looks like some sort of a medium-term topping pattern, however, further consolidation along the level of 1,850-1,900 cannot be ruled out:

Expectations before the opening of today’s session are negative, with index futures currently down 0.3-0.7%. The main European stock market indexes have lost 0.5-1.1% so far. The S&P 500 futures contract (CFD) trades in a relatively narrow intraday range, following Friday’s selloff. The nearest resistance is at around 1,860, with potential support at 1,840-1,850, marked by the late March local lows, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) is relatively weaker, as it trades below its March lows. The resistance is at around 3,550, and a potential support is at the psychological level of 3,500. There have been no positive signals so far, however, we can see some oversold:

So, was Friday's selloff a new downtrend or just a short-term pullback? It's a tough call right now - the signals are mixed and the outlook is unclear. The reason is that the S&P 500 index has invalidated its recent breakout into new all-time highs - extending March consolidation. The question is if it's still a consolidation (bullish implications) or has the consolidation already ended and we should treat breakout's invalidation on a stand-alone basis (bearish implications). Things should become much clearer in the coming days - stay tuned.

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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