Briefly: In our opinion, speculative long positions are favored (with stop-loss at 1,780, 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 lost 0.7-0.8% on Thursday, as investors reacted to Janet Yellen's testimony, oil prices decline. The S&P 500 index continued its short-term downtrend, as it got closer to the level of 1,800, before slightly bouncing off that support level. On the other hand, level of resistance is at around 1,850, marked by yesterday's daily gap down of 1,847.00-1,850.32. The next important level of resistance is at 1,870, marked by previous local lows. 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 medium-term support level, as we can see on the daily chart:

Expectations before the opening of today's trading session are positive, with index futures currently up 1.0-1.2%. The main European stock market indexes have gained 1.5-1.9% so far. Investors will now wait for some economic data announcements: Retail Sales at 8:30 a.m., Business Inventories, Michigan Sentiment number at 10:00 a.m. The S&P 500 futures contract trades within an intraday uptrend, as it retraces some of its recent move down. The nearest important level of resistance is at 1,850-1,870, marked by previous consolidation. On the other hand, support level remains at 1,800-1,820, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract follows a similar path, as it retraces some of its Wednesday's move down. The nearest important level of resistance is at 4,000 mark. The next resistance level is at 4,040, marked by previous local high. On the other hand, support level is at 3,950, among others. For now, it looks like a short-term consolidation following last Friday's - Monday move down:

Concluding, the broad stock market extended its volatile short-term consolidation on Thursday, as investors reacted to Fed's Janet Yellen testimony, oil prices decline. 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 medium-term level of support. There have been no confirmed short-term positive signals so far. However, we continue to maintain our speculative long position (opened at around 1,835 - yesterday's average opening price of S&P 500 index). We expect an upward correction or short-term downtrend's reversal at some point. We decided to move our stop-loss level up to 1,780, and potential profit target remains 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
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