Briefly: In our opinion, speculative long positions are favored (with stop-loss at 1,780, and profit target at 1,920, S&P 500 index)

Our intraday outlook is bullish, and our short-term outlook is bullish, as we expect an upward correction or downtrend's reversal. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence. We decided to change our long-term outlook to neutral recently, following a move down below medium-term lows:

Intraday outlook (next 24 hours): bullish
Short-term outlook (next 1-2 weeks): bullish
Medium-term outlook (next 1-3 months): bearish
Long-term outlook (next year): neutral

The main U.S. stock market indexes gained 1.4-2.0% on Friday, retracing some of their recent decline, as investors reacted to oil prices rebound, economic data releases. The S&P 500 index has extended its short-term consolidation along the level of 1,850. Is this a bottoming pattern before some more meaningful downtrend's reversal, or just flat correction within medium-term downtrend? The nearest important level of resistance is at around 1,870, marked by previous local lows. The next important resistance level is at 1,900 mark. On the other hand, support level remains at 1,800-1,810, marked by recent lows. There have been no confirmed positive signals so far. But will it continue downwards? Last year's August - September lows continue to act as medium-term support level, as we can see on the daily chart:

Expectations before the opening of today's trading session are positive, with index futures above their Friday's closing prices. The main European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: Empire Manufacturing at 8:30 a.m., NAHB Housing Market Index at 10:00 a.m. The S&P 500 futures contract trades within an intraday downtrend, following yesterday's move up. The nearest important resistance level is at around 1,885-1,890, and support level is at 1,865-1,870, among others, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract follows a similar path, as it retraces a part of its yesterday's move up. The nearest important level of resistance is at 4,100 mark. On the other hand, support level is at around 4,050, marked by previous resistance level. The next important level of support is at 4,000. For now, it looks like a relatively flat correction following Friday's rally:

Concluding, the broad stock market retraced some of its last week's move down, as the S&P 500 index bounced off support level at around 1,800 on Friday. However, it has remained within its week-long consolidation. Is this a bottoming action before some more meaningful rebound or just consolidation before another leg down within a medium-term downtrend? Will the S&P 500 index break below 1,800 mark? For now, the index continues to trade along its last year's August - September local lows, as they act as medium-term level of support. There have been no confirmed short-term positive signals so far. However, we continue to maintain our speculative long position (opened at around 1,835 - Thursday's average opening price of S&P 500 index). We expect an upward correction or short-term downtrend's reversal at some point. The stop-loss level is at 1,780, and potential profit target is at 1,920 (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.

Thank you.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts