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 U.S. stock market indexes gained 1.1-1.2% on Monday, breaking above their last week's consolidation, as investors reacted to the French presidential election outcome. The S&P 500 index got closer to its early April local high at around 2,378. It is now just around 1% below March 1 all-time high of 2,400.98. Will it continue its eight-year-long bull market? The Dow Jones Industrial Average broke above the level of 20,700, and relatively stronger technology Nasdaq Composite index reached new record high, as it got closer to 6,000 mark. The nearest important level of support of the S&P 500 index is now at 2,355-2,370, marked by yesterday's big daily gap up. The next support level is at 2,345-2,350, marked by recent short-term consolidation. The support level is also at around 2,320-2,330. On the other hand, the nearest important level of resistance is at 2,380-2,400, marked by record high, among others. We can see some volatility following five-month-long rally off last year's November low at around 2,100. Is this a topping pattern before medium-term 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 is trading slightly below its 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 0.2-0.3%. The European stock markets have been mixed so far. Investors will now wait for more quarterly corporate earnings releases, and some economic data announcements: Case-Shiller Home Price Index, FHFA Housing Price Index at 9:00 a.m., New Home Sales, Consumer Confidence number at 10:00 a.m. The market expects that Consumer Confidence was at 123.7 in April, down from 125.6 in March. The S&P 500 futures contract trades within an intraday consolidation following yesterday's advance. The nearest important level of support is at around 2,365, marked by local lows. The next support level is at 2,350-2,355, marked by recent consolidation. On the other hand, the nearest important level of resistance is at around 2,375, marked by local high. The next resistance level remains at 2,380-2,400, marked by March topping consolidation, and an all-time high slightly above 2,400 mark. Will the market break above almost two-month long consolidation? Or is this just another upward correction? We can see some medium-term negative technical divergences, but will they lead to a downward correction?

The technology Nasdaq 100 futures contract remains relatively stronger than the broad stock market, as it currently trades at new record high, above the level of 5,500. The nearest important support level is at around 5,480-5,500, marked previous level of resistance and local lows. The next level of support remains at 5,450, marked by short-term consolidation. There have been no confirmed negative signals so far. However, we can see some short-term overbought conditions:

Concluding, the S&P 500 index broke above its short-term consolidation yesterday, as investors reacted to Sunday's French presidential election outcome. The broad stock market index got close to its early April local high. Will it continue towards March 1 all-time high? Or is this just an upward move within almost two-month-long consolidation? The index is currently trading slightly below five-month-long medium-term upward trend line. There have been no confirmed negative signals so far. However, we still can see medium-term negative technical divergences. 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 (June) - 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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