Stock Market Uncertainty Near Record High

By: Paul_Rejczak

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 main U.S. stock market indexes were mixed between 0.0% and +0.7% on Wednesday, extending their short-term fluctuations, as investors reacted to economic data announcements, among others. The S&P 500 index fell the lowest since end of May on Thursday a week ago, as it got closer to support level of 2,400. It is now trading around 0.9% below its June 19 all-time high of 2,453.82. It has reached new record high after a breakout above short-term consolidation along the level of 2,420-2,440. Stocks have rebounded sharply following their mid-May quick two-session sell-off and continued over eight-year-long bull market off 2009 lows. The Dow Jones Industrial Average was relatively weaker yesterday, as it was unchanged. It continues to trade close to the level of 21,500. The technology Nasdaq Composite was relatively stronger than the broad stock market, as it gained 0.7%. It has retraced most of its Monday's decline. The nearest important support level of the S&P 500 index is at around 2,415-2,420, marked by some recent local lows. The next support level is at 2,400-2,410, marked by the May 25 daily gap up of 2,405.58-2,408.01, among others. On the other hand, level of resistance is at 2,425-2,430, marked by some recent fluctuations. The next resistance level remains at 2,450-2,455, marked by all-time high. There have been no confirmed negative signals so far. However, we can see overbought conditions and negative technical divergences. The S&P 500 index is trading within its a month-long consolidation, as we can see on the daily chart:

Downside Pressure

Expectations before the opening of today's trading session are negative, with index futures currently between -0.6% and -0.3% vs. their Wednesday's closing prices. The European stock market indexes have lost 0.7-1.0% so far. Investors will now wait for some economic data announcements: ADP Employment Change number at 8:15 a.m., Initial Claims, Trade Balance at 8:30 a.m., ISM Services at 10:00 a.m., Crude Inventories at 11:00 a.m. The market expects that the ADP Employment Change was at +185K in June, and ISM Services number was at 56.6. The S&P 500 futures contract trades within an intraday downtrend, as it trades slightly below its recent consolidation. The nearest important level of resistance is at around 2,425-2,430, marked by local highs. The next resistance level is at 2,440-2,450, marked by record high. On the other hand, support level is at 2,400-2,415, marked by Thursday's local low. Which direction is next? Will the market break continue its downtrend?

Tech Stocks Fluctuate

The technology Nasdaq 100 futures follows a similar path, as it retraces its yesterday's advance. It continues to trade within a short-term consolidation after last week's move down. The nearest important level of resistance is at around 5,640-5,660, and the next resistance level is at 5,690-5,700, marked by recent local high. On the other hand, support level is at 5,550, marked by local lows, as the 15-minute chart shows:

Concluding, the S&P 500 index extended its short-term consolidation on Wednesday, as it remained around 1% below record high. Is this a topping pattern before some medium-term downward correction? Or just flat correction within an uptrend, before another leg up? There have been no confirmed negative signals so far. However, we still can see negative technical divergences, along with some medium-term overbought conditions.

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Thank you.

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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