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 were mixed between 0.0% and +0.1% on Thursday, as investors hesitated following recent move down. The S&P 500 index continued its short-term downtrend, as it got closer to 2,350 mark, before bouncing off support level. The broad stock market index remains relatively close to its new all-time high of 2,400.98. The Dow Jones Industrial Average closed below 20,900 mark once again, and the technology Nasdaq Composite index remained below the level of 5,900. All three major stock market indexes continue to trade relatively close to their new record highs. The nearest important level of support of the S&P 500 index is at around 2,360, marked by previous short-term consolidation. The next support level is at 2,350-2,355, marked by 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 2,380, marked by some short-term local highs, and the next resistance level is at 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 last Wednesday, and it looked like a blow-off top pattern accompanied by some buying frenzy. The S&P 500 index continues to trade above 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 0.3%. The main European stock market indexes have gained 0.5-0.6% so far. Investors will now wait for the important monthly jobs data release: Nonfarm Payrolls, Unemployment Rate at 8:30 a.m. The market expects that Nonfarm Payrolls number was at over 200,000 in February, following much better-than-expected Wednesday's ADP report announcement. The S&P 500 futures contract trades within an intraday uptrend, as it retraces its recent move down. The nearest important level of resistance is at around 2,380-2,385, marked by some short-term local highs. The next resistance level is at 2,400, marked by record high. On the other hand, level of support remains at 2,350-2,360, marked by short-term local lows, among others. The market continues to trade within a short-term consolidation following last week's rally. Will it resume its uptrend?

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades within an intraday uptrend. It is relatively stronger than the broad stock market, as it gets closer to last week's record high at around 5,400 mark. It has bounced off support level of 5,330-5,340 yesterday. The nearest important level of resistance is at 5,400, marked by last week's all-time high. On the other hand, support level is at 5,370, marked by recent fluctuations, as the 15-minute chart shows:

Concluding, the broad stock market slightly extended its short-term downtrend yesterday, before bouncing off support level. Expectations before the opening of today's trading session are very positive, but will the market resume its uptrend? There have been no confirmed negative signals so far. However, we still can see medium-term overbought conditions accompanied by negative technical divergences. Therefore, we continue to maintain our speculative short position (opened on Wednesday, 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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