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paul-rejczak

Uncertainty Following Tuesday's Rally, Will Uptrend Continue?

August 24, 2017, 7:11 AM Paul Rejczak

Briefly:

Intraday trade: The S&P 500 index may continue to retrace its Tuesday's move up today. Therefore, intraday short position is favored again. Stop-loss is at the level of 2,460 or 5 points above Tuesday's daily high. Potential profit target is at 2,425, below Tuesday's daily gap up (S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish, as we expect downward correction. Our medium-term outlook remains bearish:

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

The main U.S. stock market indexes lost 0.3-0.4% on Wednesday, retracing some of their Tuesday's rally, as investors took short-term profits off the table following worse-than-expected economic data releases. The S&P 500 index bounced off support level on Tuesday, as it got back to 2,450 mark. It currently trades 1.9% below the August 8 all-time high of 2,490.87. The Dow Jones Industrial Average got close to the level of 21,800 yesterday, as it fell 0.4%. The technology Nasdaq Composite trades around 2.8% below its record high of 6,460.84. The nearest important level of resistance of the S&P 500 index is at 2,450-2,455, marked by Tuesday's local high. The next resistance level is at 2,465-2,475, marked by previous support level and local highs. The resistance level is also at 2,490-2,500, marked by the above-mentioned all-time high. On the other hand, support level is at 2.430-2,435, marked by Tuesday's daily gap up of 2,430.58-2,433.67. The next support level remains at 2,400-2,420. The market retraced some of its recent downtrend on Tuesday, but failed to extend its short-term uptrend yesterday. Is this a new uptrend or just upward correction? There have been no confirmed positive signals so far. We still can see some negative technical divergences. But will they lead to medium-term downward correction? The S&P 500 index trades within a medium-term consolidation following early June breakout above 2,400 mark, as we can see on the daily chart:

Daily S&P 500 index chart - SPX, Large Cap Index

More Fluctuations

Expectations before the opening of today's trading session are slightly positive, with index futures currently up % vs. yesterday's closing prices. The European stock market indexes have gained % so far. Investors will now wait for some economic data announcements: Initial Claims at 8:30 a.m., Existing Home Sales at 10:00 a.m. The market expects that the Existing Home Sales number was at 5.55M in July. Investors will also wait for the Jackson Hole Economic Policy Symposium outcomes. The S&P 500 futures contract trades within an intraday uptrend following an overnight decline. The nearest important level of resistance is at around 2,440-2,445, marked by some short-term local highs. The next resistance level is at around 2,450-2,455, marked by Tuesday's local highs. On the other hand, support level is at 2,430-2,440, marked by previous level of resistance. Will the market continue its Tuesday's rally? Or was this just some quick bounce following recent move down?

S&P 500 futures contract - S&P 500 index chart - SPX

Uptrend Or Just Bounce?

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday uptrend. It retraces its overnight decline. The nearest important level of resistance is at around 5,880-5,600. On the other hand, support level is at 5,800-5,850. The Nasdaq futures contract has retraced most of its last week's Thursday's sell-off. However, it trades within a short-term consolidation, as the 15-minute chart shows:

Nasdaq100 futures contract - Nasdaq 100 index chart - NDX

Concluding, the S&P 500 index slightly retraced its Tuesday's rally on Wednesday, as investors took short-term profits off the table. Will the market continue its recent uptrend? Or is this just a quick upward correction before another leg down? There have been no confirmed positive signals so far. We still can see some medium-term overbought conditions along with negative technical divergences.

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Thank you.

Paul Rejczak
Stock Trading Strategist
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