Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,510, and profit target at 2,300, 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 gained between 0.1% and +0.2% on Thursday, slightly extending their Wednesday's rally, as investors' sentiment remained bullish. The S&P 500 index got close to its June 19 all-time high of 2,453.82 recently. It trades just 0.2% below that record high. Stocks have rebounded following their early July move down. The Dow Jones Industrial Average was relatively weaker than the broad stock market yesterday, as it gained just 0.1%. However, it reached new record high at the level of 21,580.8 on Wednesday. The technology Nasdaq Composite was relatively stronger again, as it gained 0.2%. It has retraced more of the June move down. The nearest important support level of the S&P 500 index is at around 2,430-2,435, marked by Wednesday's daily gap up of 2,429.30-2,435.75. The next support level remains at 2,400-2,410, marked by the May 25 daily gap up of 2,405.58-2,408.01, among others. On the other hand, level of resistance is at 2,450-2,455, marked by all-time high. There have been no confirmed negative signals so far. However, we can see overbought conditions and negative technical divergences. The S&P 500 index is trading within an over month-long consolidation, as we can see on the daily chart:

Will Uptrend Continue?

Expectations before the opening of today's trading session are virtually flat, with index futures currently between -0.05% and 0.0% vs. their Wednesday's closing prices. The European stock market indexes have been mixed so far. Investors will now wait for series economic data announcements: Retail Sales, Consumer Price Index at 8:30 a.m., Industrial Production at 9:15 a.m., Michigan Sentiment, Business Inventories at 10:00 a.m. The market expects that Retail Sales grew 0.1-0.2%, and Industrial Production grew 0.4% in June. Investors will also wait for quarterly earnings releases from banks. The S&P 500 futures contract trades within an intraday consolidation, following an overnight move down. The market fluctuates following Wednesday's advance. The nearest important level of resistance is at around 2,445-2,450, marked by record high. On the other hand, support level is at 2,440, and the next support level is at 2,420-2,430, marked by recent consolidation. Will the market continue towards new all-time highs? Or is this some topping pattern before downward reversal?

Tech Stocks' Uncertainty

The technology Nasdaq 100 futures follows a similar path, as it trades within an intraday consolidation. The Nasdaq extended its short-term uptrend yesterday. The nearest important level of resistance is at around 5,850, marked by previous local high. On the other hand, support level is at 5,750-5,800, and the next level of support remains at 5,700-5,720, as the 15-minute chart shows:

Concluding, the S&P 500 index broke above its recent trading range on Wednesday, as investors' sentiment improved. Will uptrend continue towards new record highs? Or is this some topping pattern within an over-month long consolidation? There have been no confirmed negative signals so far. However, we still can see negative technical divergences, along with some medium-term overbought conditions.

Therefore, we continue to maintain our speculative short position (opened at 2,437.83 on June 5 - opening price of the S&P 500 index). Stop-loss level is at 2,510 and potential profit target is at 2,300 (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: 2,300; stop-loss level: 2,510
S&P 500 futures contract (September) - short position: profit target level: 2,297; stop-loss level: 2,507
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $230; stop-loss level: $251
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: opening price: $12.56; profit target level: $13.98; stop-loss level: $11.82

Thank you.

Paul Rejczak
Stock Trading Strategist
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