Stocks Continue Downtrend Following Worse-Than-Expected Economic Data

May 7, 2015

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,140, and profit target at 1,980, S&P 500 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 0.5-0.7% on Wednesday, extending their short-term downtrend, as investors reacted to economic data releases. Our yesterday's bearish intraday outlook has proved accurate. The S&P 500 index is close to support level of 2,070-2,080. On the other hand, level of resistance remains at around 2,100. There have been no confirmed negative signals so far, however, we still can see negative technical divergences:

Expectations before the opening of today's trading session are negative, with index futures currently down 0.7-0.8%. The main European stock market indexes have lost 1.5-2.1% so far. Investors will now wait for some economic data announcements: Challenger Job Cuts report at 7:30 a.m., Initial Claims at 8:30 a.m. The S&P 500 futures contract (CFD) is in an intraday downtrend, as it extends its short-term move down. The nearest important support level is at 2,030-2,050 and resistance level is at around 2,080, marked by recent local high, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract (CFD) extends its short-term downtrend, trading below the level of 4,350. The nearest important level of resistance is at around 4,360-4,380, as the 15-minute chart shows:

Concluding, the S&P 500 index continued its short-term downtrend yesterday, as investors reacted to worse-than-expected economic data announcements, among others. 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.


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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