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 main U.S. stock market indexes were mixed between -1.6% and +0.4% on Thursday, with technology stocks extending their sell-off, as investors took profits off the table. The S&P 500 index broke below the level of 2,200, retracing some of its recent rally. The nearest important level of resistance is at 2,200, and the next resistance level is at 2,210-2,215, marked by Wednesday's all-time high of 2,214.10. On the other hand, support level is at 2,190, marked by previous level of resistance. The next important level of support remains at 2,170-2,180. The market continues to trade along its medium-term upward trend line, as we can see on the daily chart:

Expectations before the opening of today's trading session are negative, with index futures currently down 0.2-0.5%. The European stock market indexes have lost 1.0-1.4% so far. Investors will now wait for the Nonfarm Payrolls, Unemployment Rate data release at 8:30 a.m. The S&P 500 futures contract trades within an intraday downtrend, as it extends its short-term move down. The nearest important level of resistance is at 2,190, marked by local highs. On the other hand, support level is at 2,170-2,180, among others:

The technology Nasdaq 100 futures contract remains relatively weaker than the broad stock market, as it currently trades slightly above 4,700 mark. The nearest important level of resistance is at around 4,730-4,750, marked by previous support level. On the other hand, support level is at 4,700, among others, as the 15-minute chart shows:

Concluding, the broad stock market extended its short-term decline yesterday, as the S&P 500 index fell below 2,200 mark. We still can see technical overbought conditions. Therefore, we continue to maintain our speculative short position (opened on 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