Stock Market New Downtrend Or Just Downward Correction Before Another Leg Higher?

By: Paul_Rejczak

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,210, and profit target at 2,050, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook is 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 lost 0.6-0.7% on Friday, retracing some of their recent advance, as investors took short-term profits off the table. The S&P 500 index remains relatively close to its all-time high of 2,193.81. The nearest important level of resistance is at around 2,170, marked by the daily gap down of 2,169.08-2,177.49. The next important level of resistance is at around 2,185-2,195, marked by all-time high, among others. On the other hand, support level is at around 2,150, marked by previous level of resistance. The next important support level is at 2,120. The market trades within a downward correction following recent rally. Will it continue its uptrend? Or is this some kind of a topping pattern before downward reversal?

Expectations before the opening of today's trading session are negative, with index futures currently down 0.5%. The European stock market indexes have lost 1.2-1.5% so far. Investors will now wait for the New Home Sales number release at 10:00 a.m. The S&P 500 futures contract trades within an intraday downtrend, as it extends its Friday's decline. The nearest important resistance level is at around 2,150-2,160, marked by previous level of support. On the other hand, potential support level is at 2,120-2,130, among others, as we can see on the 15-minute chart:

The technology Nasdaq 100 futures contract is relatively stronger than the broad stock market, as it remains closer to last week's new all-time high. The nearest important support level is at around 4,800-4,820, marked by previous level of resistance. The nearest important resistance level is at 4,750-4,860, among others. For now, it looks like a downward correction following recent move up:

Concluding, the broad stock market retraced some of its recent move up on Friday, as the S&P 500 index bounced off resistance level. There have been no confirmed negative signals so far. However, we continue to maintain our speculative short position (opened on July 18th at 2,162, S&P 500 index). Stop-loss level is at 2,210 and potential profit target is at 2,050 (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.

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.

* * * * *

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.

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.