Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,435 price level, with 4,520 as a stop-loss and 4,200 as a price target.

The bull market has done it again, folks. Fresh record highs topped the 4,450 mark, and you’re probably thinking… is a correction looming?

Stocks have been extending an eleven-year-long uptrend this week, as DJIA, S&P 500 indexes reached new record highs. Will this advance continue even further despite the Fed’s growing tapering fears?

The S&P 500 gained 0.3% on Thursday (Aug 13), as it extended its short-term uptrend after breaking above the 4,450 price level. The market reached a new record high at 4,461.77! Bulls are in full control, but we can see some negative technical divergences that may signal a coming weakness. Is the market poised for an unexpected short-term correction?

The broad stock market broke above its consolidation last week. The nearest important support level is at 4,430, and the next support level is at 4,400. The S&P 500 index continues to trade above its three-month-long upward trend line, but it is below the month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

S&P 500 Climbs Along Medium-Term Trend Line

The S&P 500 index continues to trade along its medium-term upward trend line. The market will most likely break below that trend line and trade sideways for some time. For now, however, it just keeps moving along the line, as we can see on the weekly chart:

Dow Jones Breaks Higher

Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index has recently broken to new record highs, and it reached the 35,500 level. There have been no confirmed negative signals so far. However, in the near term we may see some profit-taking action.

Apple Gets Closer to Previous Highs

Apple stock gained 2.1% yesterday, as it got closer to the July 15 record high of $149.78. Will it break above the resistance level of $150 and the almost month-old high? That would be bullish for the broad stock market, but a downward reversal may be expected here.

Conclusion

The S&P 500 index has been extending its over eleven-year-long bull market in recent days. Yesterday it reached another new record high of 4,461.77.

Here’s the breakdown:

• The market seems overbought and poised for a correction.
• Therefore, we decided to open a speculative short position yesterday.
• We are expecting a 5% or bigger correction from the current levels.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,435 price level, with 4,520 as a stop-loss and 4,200 as a price target.

Thank you.

Paul Rejczak,

Stock Trading Strategist

Sunshine Profits: Effective Investments through Diligence and Care