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 0.7% and 1.4% on Monday, as investors sentiment improved following last week's rebound off support level. The S&P 500 index has reached new all-time high at the level of 2,453.82 after a breakout above its short-term consolidation along the level of 2,420-2,440. Stocks have rebounded strongly after their mid-May quick two-session sell-off and they continue over eight-year-long bull market off 2009 lows. The Dow Jones Industrial Average has reached new all-time high above the level of 21,500. The technology Nasdaq Composite was relatively stronger than the broad stock market yesterday, as it gained 1.4%. It has retraced some more of its recent move down. The nearest important support level of the S&P 500 index is now at around 2,435-2,440, marked by yesterday's daily gap up of 2,433.15-2,441.79. The next level of support is at 2,415-2,420, marked by some recent local lows. The support level is also at 2,400-2,410, marked by the May 25 daily gap up of 2,405.58-2,408.01, among others. 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 currently trading above its two-week-long consolidation, as we can see on the daily chart:

At Record High

Expectations before the opening of today's trading session are slightly positive following an overnight consolidation, with index futures currently up 0.1-0.2% vs. their Monday's closing prices. The European stock market indexes have gained 0.2-0.3% so far. There will be no new important economic data announcements today. The S&P 500 futures contract trades within an intraday consolidation following yesterday's move up. The market trades along new record high. The nearest important level of resistance is at around 2,450. On the other hand, support level is now at 2,440, marked by previous local highs. The next support level is at 2,430, among others. The market broke above its short-term consolidation, as it continued the long-term uptrend. Is this a topping pattern before downward reversal? There have been no confirmed negative signals so far.

Nasdaq Also Higher

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades within an intraday consolidation. It has retraced some of its recent move down. The nearest important level of resistance is at around 5,780-5,800. The next resistance level is at 5,850. On the other hand, support level is at around 5,730-5,750, marked by recent local highs. Is this a new uptrend or just upward correction following June 9 sell-off?

Concluding, the S&P 500 index broke above its short-term consolidation on Monday, as investors' sentiment much improved after last week's rebound off support level. Will the eight-year-long bull market continue? Or is this a topping pattern before some more meaningful downward correction? There have been no confirmed negative signals so far. However, we still can see negative technical divergences, along with 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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