Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,330, and profit target at 2,150, S&P 500 index).

Our intraday outlook is now 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 gained 0.6-1.3% on Tuesday, extending their short-term uptrend, as investors' sentiment remained very bullish ahead of today's Fed Rate Decision release. The S&P 500 index reached new all-time high at the level of 2,277.53. The nearest important resistance level is at around 2,275-2,280. The next resistance level is at 2,300 mark. On the other hand, support level is at 2,240-2,250, marked by previous level of resistance. The next important support level remains at 2,200-2,220. The market broke above its medium-term upward trend line recently, as we can see on the daily chart:

Expectations before the opening of today's trading session are virtually flat. The European stock market indexes have lost 0.2-0.7% so far. Investors will wait for series of economic data announcements: Retail Sales, Producer Price Index at 8:30 a.m., Industrial Production, Capacity Utilization at 9:15 a.m., Business Inventories at 10:00 a.m., Crude Inventories at 10:30 a.m., and finally, the FOMC Rate Decision release at 2:00 p.m. The S&P 500 futures contract trades within an intraday consolidation, following yesterday's rally. The nearest important resistance level is at around 2,275-2,280, marked by all-time high. On the other hand, support level remains at 2,260-2,270, among others. There have been no confirmed negative signals so far. However, we can see short-term technical overbought conditions:

The technology Nasdaq 100 futures contract follows a similar path, as it trades within an intraday consolidation following its yesterday's rally. The nearest important resistance level is at around 4,960, marked by new record high. On the other hand, support level is at 4,900-4,920, marked by previous level of resistance, as the 15-minute chart shows:

Concluding, the broad stock market reached yet another new record high on Tuesday, as investors' sentiment remained very bullish ahead of today's series of economic data announcements, including FOMC Rate Decision. There have been no confirmed negative signals so far. However, we still can see technical overbought conditions. Therefore, we decided to open a speculative short position at the opening of today's cash market trading session (S&P 500 index). Stop-loss level is at 2,330 and potential profit target is at 2,150 (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: 2,150; stop-loss level: 2,330
S&P 500 futures contract (December) - short position: profit target level: 2,150; stop-loss level: 2,330
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $215; stop-loss level: $233
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: profit target level and stop-loss level will be calculated using trade's opening price.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts