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 U.S. stock market indexes gained between 0.5% and 0.7% on Thursday, extending their recent move up, as investors reacted to Wednesday’s FOMC Rate Decision release. The S&P 500 index has reached new all-time high at the level of 2,012.34, before closing slightly below its early September local high. The nearest important level of support is at 2,000. There have been no confirmed negative signals, however, we still can see overbought conditions, accompanied by negative technical divergences:

Expectations before the opening of today’s session are positive, with index futures currently up 0.4%. The main European stock market indexes have gained 0.2-0.8% so far. Investors will now wait for the Leading Indicators number release at 10:00 a.m. The Leading Indicators report is a compendium of previously announced economic data: new orders, jobless claims, money supply, average workweek, building permits, stock prices. The S&P 500 futures contract (CFD) trades is in an intraday consolidation following recent advance. Potential level of resistance is at around 2,010-2,015. On the other hand, the nearest important support level is at 2,000, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) is above the level of 4,100, as it moves within a relatively narrow intraday trading range. Potential resistance level is at around 4,120, and the nearest important level of support is at previous resistance of 4,090-4,100, as we can see on the 15-minute chart:

Concluding, the broad stock market resumed its uptrend. It currently trades close to new record high, which is slightly above the early September top. However, we remain bearish, expecting a downward correction or uptrend reversal. Based on my experience, medium-term divergences seem more important than the lack of clarity for the short term. Therefore, we continue to maintain our speculative short position. The stop-loss is at the level of 2,030 and potential profit target is at 1,900 (S&P 500 index). 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
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