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 were virtually flat on Friday, extending their short-term uncertainty, as investors continued to take some profits following recent move up. The S&P 500 index has managed to reach yet another new all-time high at the level of 2,019.26, before closing slightly below its early September top. There have been no confirmed negative signals, however, we still can see medium-term overbought conditions accompanied by negative technical divergences which are likely to lead to a correction:

Expectations before the opening of today’s session are negative, with index futures currently down 0.3-0.6%. The main European stock market indexes have lost 0.2-0.6% so far. Investors will now wait for the Existing Home Sales number at 10:00 a.m. The S&P 500 futures contract (CFD) is in an intraday downtrend, as it retraces recent move up. The resistance level remains at around 2,010-2,015, and the nearest important level of support is at 1,990, marked by local low, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract (CFD) follows a quite similar path as it retraces last week’s gains. The level of resistance is at around 4,115-4,120. On the other hand, the nearest important support level is at 4,050-4,060, marked by previous local extremes, as the 15-minute chart shows:

Concluding, the broad stock market resumed its uptrend as it reached new record high on Friday. 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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