Uncertainty Following Last Week’s Move Down – Will Downward Correction Extend?

August 7, 2014

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 1,970 and a profit target at 1,850, S&P 500 index)

Our intraday outlook is bearish, and our short-term outlook is bearish, following a breakout below recent consolidation:

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 U.S. stock market indexes were virtually flat on Wednesday, after a quite volatile trading session, as investors continued to hesitate following recent move down. The S&P 500 index reached new short-term downtrend low at the level of 1,911.45. The nearest important support level is at around 1,900-1,910. On the other hand, the level of resistance is at 1,940, marked by recent local highs. There have been no confirmed positive signals. For now, it looks like a flat correction within short-term downtrend:

Expectations before the opening of today’s session are slightly positive, with index futures currently up 0.2-0.3%. The main European stock market indexes have been mixed between -0.3% and 0.0% so far. Investors will now wait for some economic data announcements: European Central Banks policy decisions, and Initial Claims at 8:30 a.m. The Initial Claims is a measure of the number of jobless claims filled by individuals seeking to receive state jobless benefits. Higher initial claims may show weakening economy, however, week-to-week numbers tend to be volatile around this time of the year.  The S&P500 futures contract (CFD) is in a relatively tight intraday trading range. The nearest important support level is at around 1,900-1,905. On the other hand, the resistance level is at 1,930-1,935, marked by recent local highs, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract (CFD) is in a similar consolidation, following last week’s move down. The resistance level remains at around 3,900, and the nearest important level of support is at 3,850, marked by recent lows, as the 15-minute chart shows:

Concluding, the broad stock market is in a consolidation following recent decline. We expect some more downside. Therefore, we continue to maintain our already profitable speculative short position (with stop-loss at 1,970, and a profit target at 1,850 – S&P 500 index). It is always important to set some exit price level in case your opinion is wrong or your trading method fails at some point in time.

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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