Short-Term Uncertainty Following Last Week’s Selloff: Will Downtrend Continue?

Briefly:  In our opinion, speculative short positions of the S&P500 Index are favored (with stop-loss at 1970 and a potential profit target at 1850).

Our intraday outlook is bearish, and our short-term outlook is bearish, following a breakout below recent consolidation:

Intraday (next 24 hours) outlook: bearish

Short-term (next 1-2 weeks) outlook: bearish

Medium-term (next 1-3 months) outlook: neutral

Long-term outlook (next year): bullish

The U.S. stock market indexes lost 0.3-0.4% on Friday, extending their recent selloff, as investors reacted to some key economic data announcements - monthly jobs report, the ISM index, among others. Investors begin to expect rising interest rates, which is putting downward pressure on stock prices. The S&P500 index got closer to the level of 1,900, as it reached the daily low at 1916.37, which is the lowest since early June. The market remains in a short-term downtrend, following a breakout below upward trend line. The nearest important support level is at around 1900-1920. On the other hand, the level of resistance is at 1940-1950, marked by previous local lows. There have been no confirmed positive signals so far, as we can see on the daily chart:

Expectations before the opening of today’s session are positive, with index futures currently up 0.3%. The main European stock market indexes have been mixed between -0.2% and +0.3% so far. The S&P500 futures contract (CFD) is in an intraday consolidation, following last week’s decline. The nearest important level of support is at 1910-1915, and the nearest resistance level is at around 1930, marked by Friday’s local highs, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) is in a similar consolidation, following recent move down. The resistance level is at around 3900, and the level of support remains at around 3850. For now, it looks like a flat correction within a short-term downtrend:

Conclusion:  The broad stock market is in a short-term downtrend following last week’s breakout below two-month long upward trend line. In our opinion, speculative short positions with a stop-loss at 1970 and a potential profit target at 1850 (S&P500 index) seem justified at this moment.

Thank you.

Paul Rejczak

Stock Trading Strategist

Stock Trading Alerts

SunshineProfits.com

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