Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,210, and profit target at 2,050, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook is now neutral, following S&P 500 index breakout above last year's all-time high:

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

The U.S. stock market indexes lost 0.5-0.8% on Tuesday, retracing some of their July rally, as investors took profits off the table. The S&P 500 index broke below its short-term consolidation along the level of 2,160-2,170. It currently trades close to support level of 2,150. The next important support level is at 2,130-2,135, marked by previous level of resistance. On the other hand, resistance level is at 2,170-2,175, marked by Monday's all-time high of 2,178.29. The next potential resistance level is at 2,200. The market is within a downward correction following month-long rally, as we can see on the daily chart:

Expectations before the opening of today's trading session are slightly negative, with index futures currently down 0.1-0.2%. The European stock market indexes have lost 0.1-0.2% so far. The S&P 500 futures contract trades within an intraday consolidation following yesterday's move down. The nearest important level of support is at around 2,140. On the other hand, resistance level remains at 2,160-2,170, marked by recent consolidation. For now, it looks like a flat correction within a short-term downtrend:

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades along the level of 4,700. The nearest important support level is at around 4,680, marked by yesterday's daily low. On the other hand, resistance level is at 4,710-4,720, as the 15-minute chart shows:

Concluding, the broad stock market retraced some of its last month's rally on Tuesday. Is this just a downward correction or new downtrend? We still can see technical overbought conditions accompanied by bearish technical divergences. Therefore, we continue to maintain our speculative short position (opened on July 18th at 2,162, S&P 500 index). Stop-loss level is at 2,210 and potential profit target is at 2,050 (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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