Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,410, and profit target at 2,200, 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 lost between 0.2% and 0.3% on Tuesday, extending their short-term consolidation, as investors reacted to oil prices decline, economic data releases. The S&P 500 index has bounced off support level of 2,350-2,360 once again. The broad stock market index remains relatively close to its March 1 all-time high of 2,400.98. The Dow Jones Industrial Average closed below 20,900 mark, and the technology Nasdaq Composite index remained slightly below the level of 5,900. All three major stock market indexes continue to trade relatively close to their early March new record highs. The nearest important level of support of the S&P 500 index is at around 2,350-2,360, marked by previous short-term consolidation and the February 21 daily gap up of 2,351.16-2,354.91. The support level is also at around 2,320. On the other hand, the nearest important level of resistance is at around 2,380, marked by some short-term local highs, and the next resistance level is at 2,390-2,400, marked by all-time high. Will the market extend its year-long medium-term uptrend even further before some more meaningful downward correction? We can see some short-term volatility following four-month-long rally off last year's November low at around 2,100. Is this a topping pattern before downward reversal? The uptrend accelerated on March 1 and it looked like a blow-off top pattern accompanied by some buying frenzy. The S&P 500 index continues to trade above its over year-long medium-term upward trend line, as we can see on the daily chart:

Expectations before the opening of today's trading session are positive, with index futures currently up 0.1-0.2%. The European stock market indexes have been mixed so far. Investors will now wait for series of economic data announcements: Consumer Price Index, Retail Sales, Empire Manufacturing number at 8:30 a.m., Business Inventories, NAHB Housing Market Index at 10:00 a.m., Crude Inventories at 10:30 a.m., and finally, the FOMC Rate Decision release at 2:00 p.m. Investors expect that the Fed will raise its interest rates today. The S&P 500 futures contract trades within an intraday uptrend, as it retraces yesterday's move down. The nearest important level of resistance is at around 2,370-2,375, marked by short-term local highs. The next resistance level is at 2,390-2,400, marked by record high. On the other hand, level of support is at 2,355-2,360, marked by some short-term local lows, among others. The market continues to trade within a short-term consolidation following late April - early March rally. There have been no confirmed negative signals so far. For now, it looks like relatively flat correction within an uptrend:

The technology Nasdaq 100 futures contract is relatively stronger than the broad stock market, as it currently trades close to record high at around 5,400. It has retraced its yesterday's decline after bouncing off support level at 5,360-5,370. The market remains within short-term consolidation following Friday's advance. The nearest important level of resistance is at 5,400, marked by all-time high. The next support level remains at 5,330-5,350, as the 15-minute chart shows:

Concluding, the broad stock market extended its short-term fluctuations on Tuesday, as the S&P 500 got close to last week's local low again. For now, it looks like a relatively flat correction within two-week-long downtrend. Will the market resume its medium-term uptrend? There have been no confirmed negative signals so far. However, we still can see medium-term overbought conditions accompanied by negative technical divergences. Therefore, we continue to maintain our speculative short position (opened on Wednesday, February 15 at 2,335.58 - opening price of the S&P 500 index). Stop-loss level is at 2,410 and potential profit target is at 2,200 (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: 2,200; stop-loss level: 2,410
S&P 500 futures contract (March) - short position: profit target level: 2,197; stop-loss level: 2,407
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $220; stop-loss level: $241
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: profit target level: $15.47; stop-loss level: $12.98

Thank you.

Paul Rejczak
Stock Trading Strategist
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