Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,120 and profit target at 1,990, S&P 500 index)

Our intraday outlook is now bearish, and our short-term outlook is bearish:

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

The main U.S. stock market indexes gained 1.1-1.5% on Tuesday, extending their short-term uptrend, as investors reacted to economic data releases, among others. The S&P 500 index got closer to its resistance level of 2,080-2,100, marked by previous local highs. On the other hand, support level is at 2,040, and the next important support level remains at 2,000-2,020. There have been no confirmed negative signals so far, however, we can see short-term overbought conditions:

Expectations before the opening of today's trading session are virtually flat. The European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: Pending Home Sales at 10:00 a.m., Crude Inventories at 10:30 a.m. The S&P 500 futures contract trades within an intraday consolidation following recent move up. The nearest important level of resistance is at around 2,075. On the other hand, support level is at 2,050-2,060, marked by previous resistance level, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades along the level of 4,690. The nearest important level of resistance is at 4,700, and support level is at 4,670-4,680, among others, as we can see on the 15-minute chart:

Concluding, the broad stock market continued its short-term uptrend yesterday, as the S&P 500 index got closer to its November-December local highs. There have been no confirmed short-term negative signals so far. However, we can see some overbought conditions. Therefore, we decided to open a speculative short position at the opening of today's trading session (S&P 500 index). We expect a downward correction or short-term uptrend reversal. Stop-loss is at 2,120 and potential profit target is at 1,990. So, we will basically try to re-enter our previous short position. It was closed mid-December at stop-loss-profit-taking level of 2,060 with a gain of almost 30 index points. 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
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