Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,510, and profit target at 2,300, 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 -0.4% and +0.1% on Thursday, extending their short-term fluctuations following recent move up, as investors' sentiment remained bullish. The S&P 500 index has reached new all-time high at the level of 2,484.04 last week, before reversing slightly lower. It continued to fluctuate on Thursday, as it traded just 0.5% below new record high. The Dow Jones Industrial Average reached new record high at the level of 22,044.9 yesterday, as it remained relatively stronger than the broad stock market. The technology Nasdaq Composite lost 0.4%, as investors took some short-term profits off the table following better-than-expected quarterly earnings release from Apple. The nearest important support level of the S&P 500 index is at around 2,460-2,465, marked by July 19 daily gap up of 2,460.92-2,463.85. The next level of support is at 2,450-2,455, marked by June 19 local high. The support level is also at 2,430-2,435, marked by July 12 daily gap up of 2,429.30-2,435.75. On the other hand, level of resistance is at 2,480-2,485, marked by new all-time high. The next resistance level is at 2,500 mark. There have been no confirmed negative signals so far. However, we can see overbought conditions and negative technical divergences. The S&P 500 index broke above its over month-long consolidation, as we can see on the daily chart:

Positive Expectations

Expectations before the opening of today's trading session are slightly positive, with index futures currently up between 0.1% and 0.2% vs. their yesterday's closing prices. The European stock market indexes have gained 0.1-0.2% so far. Investors will now wait for some important economic data announcements: Nonfarm Payrolls number, Unemployment Rate, Trade Balance at 8:30 a.m. The market expects that Nonfarm Payrolls was at +182,000 in July. Investors will also wait for more quarterly corporate earnings releases. The S&P 500 futures contract trades within an intraday uptrend, as it retraces its yesterday's move down. The market extends over-week-long consolidation along new record high, close to the level of 2,480. The nearest important resistance level is at around 2,480-2,500. On the other hand, support level is at 2,450-2,460, marked by some short-term local lows. The next support level remains at 2,440, among others. Will the market extend its uptrend? Or is this some topping pattern before downward reversal?

Tech Stocks Uncertainty

The technology Nasdaq 100 futures contract trades within a similar intraday uptrend, as it retraces some of its yesterday's move down. Is this a new uptrend or just more over-week-long sideways action? The nearest important level of resistance is at around 5,950-6,000. On the other hand, support level is at 5,850-5,870, marked by short-term local lows, as the 15-minute chart shows:

Concluding, the S&P 500 index continued to trade within a short-term consolidation on Thursday, as investors awaited today's monthly jobs data release, among others. Will the bull market extend even further? Or is this some topping pattern before downward reversal? There have been no confirmed negative signals so far. However, we still can see negative technical divergences, along with medium-term overbought conditions.

Therefore, we continue to maintain our speculative short position (opened at 2,437.83 on June 5 - opening price of the S&P 500 index). Stop-loss level is at 2,510 and potential profit target is at 2,300 (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: 2,300; stop-loss level: 2,510
S&P 500 futures contract (September) - short position: profit target level: 2,297; stop-loss level: 2,507
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $230; stop-loss level: $251
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: opening price: $12.56; profit target level: $13.98; stop-loss level: $11.82

Thank you.

Paul Rejczak
Stock Trading Strategist
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