Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,330, and profit target at 2,150, S&P 500 index).

Our intraday outlook remains 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 were mixed between -0.2% and +0.2% on Tuesday, extending their short-term consolidation, as investors continued to take profits off the table following last week's rally. All three major stocks market indexes trade along their all-time highs. The S&P 500 index remains relatively close to its Friday's new record high of 2,282.10, and the Dow Jones Industrial Average continues to trade close to round resistance level of 20,000. The technology Nasdaq Composite has reached new record high yesterday. Will the market extend its year-long medium-term uptrend even further before some more meaningful downward correction? The next possible resistance level of the S&P 500 index is at 2,300 mark. On the other hand, the nearest important support level is at around 2,260, marked by last week's consolidation. The next support level is at 2,230-2,240, marked by recent local low. We can see new long-term high within almost eight-year-long bull market from 2009 multi-year of 666.8. However, the index is barely above its month-long consolidation. It 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 once again virtually flat, as investors hesitate following recent fluctuations. The main European stock market indexes have gained 0.1-0.3% so far. Investors will now wait for the Crude Inventories data announcement at 10:30 a.m. The S&P 500 futures contract trades within an intraday consolidation, as it extends its yesterday's fluctuations. For now, it looks like a flat correction within a short-term downtrend. The market remains within its last week's consolidation along the level of 2,260-2,265. The nearest important level of resistance is at around 2,275, marked by local high. On the other hand, support level is at 2,255-2,260, marked by recent local low. The next support level is at 2,230-2,240, marked by previous local lows. Is this a topping pattern before downward correction of the November - December rally? There have been no confirmed negative signals so far. The futures contract trades along its recent local lows, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract remains relatively stronger than the broad stock market. It reached new record high yesterday, as it got close to 5,050 mark. The nearest important level of resistance is at around 5,050, marked by all-time high. On the other hand, support level is at 4,980-5,000, marked by previous level of resistance. For now, it looks like another relatively flat correction within a short-term uptrend. Will the technology Nasdaq 100 futures contract accelerate its medium-term uptrend? There have been no confirmed negative signals so far. However, we can see short-term overbought conditions:

Concluding, the broad stock market broke above its short-term consolidation on Friday, as the S&P 500 index reached new all-time high of 2,282.10. It was trading slightly lower on Monday and Tuesday, as investors were taking some short-term profits off the table. Will stocks continue higher before some more meaningful downward correction? There have been no confirmed negative signals so far. We still can see medium-term overbought conditions accompanied by negative technical divergences. Therefore, we continue to maintain our speculative short position (opened on December 14 at 2,268.35 - daily opening price of the S&P 500 index). Stop-loss level remains at 2,330 and potential profit target is at 2,150 (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: 2,150; stop-loss level: 2,330
S&P 500 futures contract (March 2017) - short position: profit target level: 2,145; stop-loss level: 2,325
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $214; stop-loss level: $232
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: profit target level: $16.35; stop-loss level: $14.00 (calculated using trade's opening price on Dec 14 at $14.78).

Thank you.

Paul Rejczak
Stock Trading Strategist
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