Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,240, and profit target at 2,060, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains 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 0.2-0.4% on Friday, extending their short-term consolidation following recent move up, as investors continued to take profits off the table. The S&P 500 index broke above the resistance level of 2,150-2,160 recently. The next resistance level is at 2,180-2,200, marked by record high. On the other hand, support level is at 2,100-2,120, marked by previous resistance level. The next important level of support remains at around 2,080, marked by recent local lows, as we can see on the daily chart:

Expectations before the opening of today's trading session are positive, with index futures currently up 0.1-0.3%. The European stock market indexes have gained 0.4-0.6% so far. The S&P 500 futures contract trades within an intraday consolidation, as it continues to fluctuate along the level of 2,185. The nearest important level of support is at around 2,175, marked by local low. On the other hand, resistance level is at 2,185-2,190. For now, it looks like a flat correction within an uptrend. However, we can see some negative technical divergences, as the 15-minute chart shows:

The technology Nasdaq 100 futures follows a similar path, as it currently trades above the level of 4,800. The nearest important level of support remains at around 4,780-4,800. On the other hand, resistance level is at 4,850-4,900, among others. There have been no confirmed short-term negative signals so far.

Concluding, the broad stock market extended its short-term consolidation on Friday, as the S&P 500 index remained close to its record high of 2,193.81. We can see short-term overbought conditions, accompanied by negative technical divergences. Therefore, we continue to maintain our speculative short position (opened on Wednesday, November 16 at 2,177 - opening price of the S&P 500 index). Stop-loss level is at 2,240 and potential profit target is at 2,060 (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.

To summarize: short position in S&P 500 index is justified from the risk/reward perspective with the following entry prices, stop-loss orders and profit target price levels:

S&P 500 index - short position: profit target level: 2,060; stop-loss level: 2,240
S&P 500 futures contract - short position: profit target level: 2,055; stop-loss level: 2,235
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $206; stop-loss level: $224
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: profit target level: $18.38; stop-loss level: $15.64 (calculated using trade's opening price on Nov 16 at $16.6).

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts