Briefly: In our opinion, speculative long positions are favored (with stop-loss at 1,760, and profit target at 1,920, S&P 500 index)

Our intraday outlook is now bullish, and our short-term outlook is bullish, as we expect an upward correction or downtrend's reversal. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence. We decided to change our long-term outlook to neutral recently, following a move down below medium-term lows:

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

The U.S. stock market indexes were mixed between -0.6% and +0.5% on Wednesday, following volatile trading session, as investors reacted to Fed's Janet Yellen Congressional Testimony, oil prices fluctuations. The S&P 500 index continues to trade within a short-term consolidation along the level of 1,850. The nearest important level of support is at around 1,800-1,830, marked by previous local lows. On the other hand, resistance level remains at 1,870, marked by previous level of support. For now, it looks like consolidation within a medium-term downtrend. There have been no confirmed positive signals so far. Will it continue downwards? Or is this a bottoming pattern before some more meaningful upward correction? Last year's August - September lows continue to act as a medium-term support level, as we can see on the daily chart:

Expectations before the opening of today's trading session are very negative, with index futures currently down 2.0-2.3%. The main European stock market indexes have lost 2.1-3.6% so far. Investors will now wait for the Initial Claims number release at 8:30 a.m. The S&P 500 futures contract trades within an intraday uptrend, as it gets closer to the level of 1,800. It is trading close to its mid-January low of 1,803.90 right now. The nearest important level of support is at around 1,800. On the other hand, resistance level is at 1,820-1,830, marked by recent local lows. Will it continue lower? We can see some short-term oversold conditions which may lead to a downtrend's reversal or an upward correction:

The technology Nasdaq 100 futures contract follows a similar path, as it extends its short-term downtrend this morning. It trades close to its Monday's intraday low. The nearest important level of resistance is at around 3,900. On the other hand, potential support level is at 3,850. There have been no confirmed positive signals so far. However, we can see some oversold conditions:

Concluding, the broad stock market extended its volatile short-term consolidation on Wednesday, as investors reacted to Fed's Janet Yellen testimony. Is this a bottoming action before some more meaningful rebound or just consolidation before another leg down within a medium-term downtrend? Will the S&P 500 index break below its mid-January low of 1,812.29? For now, the index continues to trade along its last year's August - September local lows, as they act as a medium-term level of support. There have been no confirmed short-term positive signals so far. However, we decided to open a speculative long position at the opening of today's cash market trading session (S&P 500 index). We expect an upward correction or short-term downtrend's reversal at some point. Stop-loss is at 1,760, and potential profit target is at 1,920 (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