Negative Expectations Following Short-Term Consolidation

August 28, 2014

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,030, and a 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 were virtually flat on Wednesday, as investors hesitated following recent rally. The S&P 500 index remains close to its all-time high of 2,005.04, trading along the level of 2,000. The nearest important resistance level is at around 2,000-2,005. On the other hand, the level of support is at 1,980-1,990, marked by some of the recent local lows. There have been no confirmed negative signals so far. However, we can see negative divergences, accompanied by some technical overbought conditions:

Expectations before the opening of today’s session are negative, with index futures currently down 0.3%. The European stock market indexes have lost 0.4-0.8% so far. Investors will now wait for some economic data announcements: Initial Claims, GDP – Second Estimate at 8:30 a.m., Pending Home Sales at 10:00 a.m. The U.S. GDP figure will be closely watched as markets are expecting a confirmation of an economic rebound. The S&P 500 futures contract (CFD) is in a descending intraday channel, as it trades below the level of 2,000. The resistance level is at around 2,000, and the nearest important level of support is at 1,980-1,985, among others, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract (CFD) is in an intraday downtrend, as it trades below the level of 4,080. The resistance level remains at 4,080-4,100, and the nearest important level of support is at around 4,050-4,060, as the 15-minute chart shows:

Concluding, the broad stock market remains close to its all-time high. There have been no confirmed uptrend reversal signals so far. However, we can see some negative technical divergences. We remain cautiously pessimistic, expecting a downward correction. Therefore, we continue to maintain our speculative short position (entry point at 2,000.5 - S&P 500 index). The stop-loss is at 2,030, and potential profit target at the level of 1,900 (S&P 500 index).

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.

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