Stock Market Extends Its Month-Long Uptrend, Will It Go Even Higher?

By: Paul_Rejczak

Briefly: In our opinion, no speculative positions are justified.

Our intraday outlook is now neutral, and our short-term outlook is neutral. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence:

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

The main U.S. stock market indexes gained 0.2-0.7% on Friday, extending their short-term uptrend, as investors reacted to some economic data releases. The S&P 500 index is at the resistance level of 2,050, after breaking above the level of resistance of 2,040, marked by the early January daily gap down at 2,038.20-2,043.62. The next important level of resistance is at around 2,080, marked by the late December local high of 2,081.56. On the other hand, support level remains at 2,000 mark, and the next support level is at 1,960-1,980, marked by previous level of resistance. There have been no confirmed negative signals so far. However, we can see some technical overbought conditions. Will this uptrend extend even higher? The index continues to trade within a slightly descending medium-term trading channel, as we can see on the daily chart:

S&P500 Futures Daily Chart

Expectations before the opening of today's trading session are slightly positive, with index futures currently up 0.1%. The European stock market indexes have gained 0.2-0.6% so far. Investors will now wait for the Existing Home Sales number announcement at 10:00 a.m. The S&P 500 futures contract trades within an intraday uptrend, following Friday's fluctuations. The nearest important level of resistance is at around 2,040-2,050. On the other hand, support level remains at 2,025-2,030, marked by recent local lows, as the 15-minute chart shows:

S&P500 Futures 15-Minute Chart

The technology Nasdaq 100 futures contract follows a similar path, as it currently trades close to the level of 4,400. There have been no confirmed negative signals so far. The nearest important level of support is at around 4,375, marked by some short-term local lows. Is this a topping pattern or just consolidation within a short-term uptrend?

NASDAQ 100 Futures 15-Minute Chart

Concluding, the broad stock market continued its short-term uptrend on Friday, as investors' sentiment improved even further following economic data releases, among others. The S&P 500 index has retraced most of its January sell-off. But will it continue higher despite some technical overbought conditions? There have been no confirmed short-term negative signals so far. Our speculative position has been closed on Friday, at the stop-loss level of 2,050 (S&P 500 index). We lost 55 index points on that trade, betting against month-long uptrend. 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. Currently, we prefer to be out of the market, avoiding low risk/reward ratio trades. We will let you know when we think it is safe to get back in the market.

Paul Rejczak
Stock Trading Strategist
Stock Trading Alerts
SunshineProfits.com

Stock market strategist, who has been known for quality of his technical and fundamental analysis since the late nineties. He is interested in forecasting market behavior based on both traditional and innovative methods of technical analysis. Paul has made his name by developing mechanical trading systems. Paul is the author of Sunshine Profits’ premium service for stock traders: Stock Trading Alerts.

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor. By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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