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Stock Market Short-Term Uncertainty As Stocks Hover Along Record Highs

Stock-Markets / Stock Markets 2016 Dec 01, 2016 - 02:01 PM GMT

By: P_Radomski_CFA

Stock-Markets

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,240, and profit target at 2,060, 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 -1.2% and 0.0% on Wednesday, extending their short-term consolidation following last week's advance, as investors reacted to economic data releases, among others. The S&P 500 index reached new record high at the level of 2,214.10, before closing down 0.3%. The nearest important level of resistance is at around 2,210-2,215. On the other hand, support level is at 2,190-2,200, marked by previous level of resistance. The next important level of support remains at 2,170-2,180. The market continues to trade along its medium-term upward trend line, as we can see on the daily chart:

Expectations before the opening of today's trading session are slightly negative, with index futures currently down 0.1-0.3%. The European stock market indexes have lost 0.7-1.1% so far. Investors will now wait for some economic data announcements: Initial Claims at 8:30 a.m., Construction Spending, ISM Index at 10:00 a.m. The S&P 500 futures contract trades within an intraday consolidation, following an overnight decline. The nearest important level of resistance is at around 2,200, marked by recent support level. The next resistance level is at 2,210-2,215. On the other hand, support level is at 2,190, marked by some local lows:

The technology Nasdaq 100 futures contract is relatively weaker than the broad stock market, as it currently trades below its recent consolidation. The nearest important level of resistance is at around 4,830-4,850, marked by previous level of support. On the other hand, support level is at 4,800, among others, as the 15-minute chart shows:

Concluding, the broad stock market retraced some of its recent advance yesterday, as the S&P 500 index broke slightly below 2,200 mark. We still can see technical overbought conditions. Therefore, we continue to maintain our speculative short position (opened on November 16 at 2,177 - opening price of the S&P 500 index). Stop-loss level is at 2,240 and potential profit target is at 2,060 (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: 2,060; stop-loss level: 2,240
S&P 500 futures contract - short position: profit target level: 2,055; stop-loss level: 2,235
SPY ETF (SPDR S&P 500, not leveraged) - short position: profit target level: $206; stop-loss level: $224
SDS ETF (ProShares UltraShort S&P500, leveraged: -2x) - long position: profit target level: $18.38; stop-loss level: $15.64 (calculated using trade's opening price on Nov 16 at $16.6).

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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