Stocks Fluctuate Following Recent Decline - Bottom Or Just Pause Before Another Leg Down?

By: Paul_Rejczak

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,120, and profit target at 2,000, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence:

Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): bearish
Long-term outlook (next year): neutral

The U.S. stock market indexes lost 0.2-0.4% on Wednesday, extending their short-term consolidation following recent move down, as investors reacted to economic data announcements. The S&P 500 index continues to trade below the level of 2,100. It remains above its May consolidation along the level of 2,050. The nearest important level of support is at around 2,070, and the next support level is at 2,050, marked by some previous local highs. On the other hand, the nearest important level of resistance is at around 2,085, marked by previous support level. The next resistance level remains at 2,100 mark. Last year's highs along the level of 2,100 continue to act as medium-term resistance level. Will the market break above these medium-term highs and continue its seven-year long bull market? Or will it reverse its over three-month long uptrend off medium-term support level at around 1,800?

Expectations before the opening of today's trading session are negative, with index futures currently down 0.3-0.4%. The European stock market indexes have lost 0.5-0.7% so far. Investors will now wait for some economic data announcements: Consumer Price Index, Initial Claims, Philadelphia Fed number at 8:30 a.m., NAHB Housing Market Index at 10:00 a.m. The S&P 500 futures contract trades within an intraday consolidation, following an overnight selloff. The nearest important level of support is at around 2,060, marked by short-term local low. On the other hand, resistance level is at 2,080-2,085, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades slightly below the level of 4,400. The nearest important level of support is at around 4,380, and resistance level is at 4,400-4,420, among others, as the 15-minute chart shows:

Concluding, the broad stock market remained within a short-term consolidation on Wednesday, as investors reacted to the FOMC's Rate Decision release, among others. We continue to maintain our speculative short position (opened on June 1 at 2,093.94 - S&P 500 index). However, we decided to move our stop-loss level from 2,140 down to 2,120. Our profit target remains at 2,000 (S&P 500 index). 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.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts
SunshineProfits.com

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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Disclaimer

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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