Uncertainty Following Recent Sell-Off - Will Downtrend Continue?

March 12, 2015

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,090 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 between 0.2% and 0.6% on Wednesday, as the broad stock market slightly extended its short-term downtrend. Our yesterday's negative intraday outlook has proved accurate. The S&P 500 index trades within November-January consolidation. The nearest important resistance level remains at around 2,060-2,065, marked by some previous local extreme levels. On the other hand, support level is at 2,020-2,025, among others, as we can see on the daily chart:

Expectations before the opening of today's trading session are positive, with index futures currently up 0.2%. The main European stock market indexes have been mixed so far. Investors will now wait for economic data announcements: Initial Claims, Retail Sales at 8:30 a.m., Business Inventories number at 10:00 a.m. The S&P 500 futures contract (CFD) extends its short-term consolidation today, as it fluctuates along the level of 2,040. The nearest important level of resistance is at around 2,050:

The technology Nasdaq 100 futures contract (CFD) bounced off support level at around 4,300. The nearest important resistance level is at 4,320-4,340, marked by recent local lows. For now, it looks like a relatively flat correction within a short-term downtrend, as the 15-minute chart shows:

Concluding, the broad stock market remains in a short-term downtrend, following February advance. We continue to maintain our speculative short position (opened on February 18 at 2,099.16, S&P 500 index), as we expect some more downside. We decided to lower our stop-loss level to 2,090 (S&P 500 index), just to protect our gains. Potential profit target remains 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

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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