Stocks Bounced Off Sharply Following Recent Move Down…Downtrend Reversal Or Just Correction?

October 6, 2014

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 1,985 and profit target at 1,900, S&P 500 index)

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

Intraday (next 24 hours) outlook: bearish

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

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

Long-term outlook (next year): bullish

The main U.S. stock market indexes gained between 1.0% and 1.2% on Friday, retracing some of their recent losses, as investors hoped for the end of a downward correction. The S&P 500 index continued to move up, following Thursday’s bounce off the support level at around 1,920-1,930, marked by early August consolidation. The nearest important level of resistance is at around 1,965-1,970, marked by previous local lows. The next resistance level is at 1,985. For now, it looks like an upward correction within a short-term downtrend, as we can see on the daily chart:

Expectations before the opening of today’s session are slightly positive, with index futures currently up 0.3%. The European stock market indexes have gained 0.2-0.9 so far. The S&P 500 futures contract (CFD) is in a relatively narrow trading range, as it moves along last week’s consolidation. The nearest important resistance level is at around 1,975, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) is close to the resistance level of 4,030, marked by some recent local extremes. For now, it looks like a correction within a downtrend. The nearest important level of support remains at around 4,000:

Concluding, the broad stock market bounced off sharply, following its recent losses. However, there have been no confirmed downtrend reversal signals. We remain bearish, expecting some more downside. We continue to maintain our already profitable speculative short position with entry point at 2,000.5 – S&P 500 index. The stop-loss is at the level of 1,985. Potential profit target remains at 1,900 (S&P 500 index). 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.

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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