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 remains 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 were mixed between -0.1% and +0.2% on Thursday, as investors took short-term profits off the table following Tuesday - Wednesday rally. The S&P 500 index has reached yet another new all-time high at the level of 2.300.99, before closing down 0.1%. The Dow Jones Industrial Average has reached new all-time high above the level of 20,000 and the technology Nasdaq Composite index has continued its rally above the level of 5,600. Will the market extend its year-long medium-term uptrend even further before some more meaningful downward correction? The nearest important resistance level of the S&P 500 index remains at 2,300 mark. On the other hand, the nearest support level is at around 2,285-2,290, marked by Wednesday's daily gap up of 2,284.63-2,288.88. The next support level is at 2,255-2,260, marked by recent local lows. We can see new long-term highs within almost eight-year-long bull market from 2009 multi-year low of 666.8. Is this some kind of a topping pattern before downward reversal? The S&P 500 index still trades along medium-term upward trend line, as we can see on the daily chart:

Expectations before the opening of today's trading session are virtually flat, as investors hesitate following recent move up. The European stock market indexes have been mixed so far. Investors will wait for more quarterly corporate earnings releases. They will also wait for some economic data announcements: GDP - Advance number, Durable Orders at 8:30 a.m., Michigan Sentiment at 10:00 a.m. The GDP (Gross Domestic Product) is the broadest measure of economic activity. Changes in GDP reflect the growth rate of total economic output. The market expects GDP grew 2.1% annualized in the fourth quarter of 2016. The S&P 500 futures contract trades within an intraday consolidation, as it extends its yesterday's fluctuations. For now, it looks like another relatively flat correction within a short-term uptrend. The nearest important level of resistance is at around 2,300. On the other hand, support level is at 2,285-2,290, marked by recent fluctuations. The next support level is at 2,275-2,280, among others. There have been no confirmed negative signals so far. The futures contract continues to trade above its previous short-term consolidation, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract remains relatively stronger than the broad stock market indices, as it is currently close to new all-time high. The market trades along 5,150 mark. The nearest important support level is at 5,130-5,150, marked by some short-term fluctuations. The next support level is at 5,100, marked by previous level of resistance. We still can see short-term technical overbought conditions. However, there have been no confirmed negative signals so far. Technology stocks have accelerated their medium-term uptrend recently:

Concluding, the broad stock market fluctuated on Thursday, as investors took some short-term profits off the table. The S&P 500 index trades along new record high of 2,300.99. Will stocks continue higher following quarterly corporate earnings releases? 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 December 14 at 2,268.35 - daily opening price of the S&P 500 index). Stop-loss level remains 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 (March 2017) - short position: profit target level: 2,145; stop-loss level: 2,325
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $214; stop-loss level: $232
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: profit target level: $16.35; stop-loss level: $14.00 (calculated using trade's opening price on Dec 14 at $14.78).

Thank you.

Paul Rejczak
Stock Trading Strategist
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