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 were mixed between -0.2% and +0.1% on Monday, as they extended their short-term consolidation following Wednesday's FOMC Rate Decision release rally. The S&P 500 index remains relatively close to its March 1 all-time high of 2,400.98. The Dow Jones Industrial Average continued to trade above 20,900 mark, and the technology Nasdaq Composite index remained above the level of 5,900. All three major stock market indexes remain relatively close to their early March new record highs. For now, it looks like a flat correction within medium-term uptrend. Will stocks break above their few-week-long trading range? The nearest important level of support of the S&P 500 index is at around 2,370, marked by recent local highs. The next support level remains at 2,350-2,360, marked by local lows 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 2,390-2,400, 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 slightly positive, with index futures currently up 0.1-0.2%. The European stock market indexes have been mixed so far. There will be no new important economic data announcements today. Investors will wait for Wednesday's Existing Home Sales and Crude Inventories releases, among others. The S&P 500 futures contract trades within an intraday consolidation, following an overnight move up. It trades above the level of 2,370. The nearest important level of resistance is at around 2,375-2,380, marked by short-term consolidation. The next resistance level is at 2,395-2,400, marked by all-time high. On the other hand, support level is at 2,365-2,370, marked by previous local highs, among others. The next support level remains at 2,355-2,360, marked by short-term consolidation. The market continues to trade within a consolidation following late April - early March rally. There have been no confirmed negative signals so far. But will it break above its early March record high?

The technology Nasdaq 100 futures contract is still relatively stronger than the broad stock market, as it continues to trade above 5,400 mark. The market extends its eight-year-long bull-run. It is currently trading relatively close to new record high. The resistance level is at around 5,440, marked by last week's new all-time high. The nearest important level of support is at 5,400, marked by previous level of resistance. The next support level remains at 5,370, marked by some local lows, as the 15-minute chart shows:

Concluding, the broad stock market extended its short-term consolidation on Monday, as investors remained uncertain following last Wednesday's FOMC Rate Decision release rally. The S&P 500 index remains relatively close to its early March record high. 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. Stocks may retrace some of their almost five-month-long rally at some point in time. Therefore, we continue to maintain our speculative short position (opened on 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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