Tuesday, September 9, 2014

Indexes Search For New Direction Following August Rally

by Paul Rejczak

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,030 and a profit target at 1,900, S&P 500 index)

Our intraday outlook is bearish, and our short-term outlook is bearish:

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 main U.S. stock market indexes gained between 0.4% and 0.6% extending their recent consolidation, as investors reacted positively to worse-than-expected monthly jobs data release. The S&P 500 index remains relatively close to its all-time high of 2,011.17. The resistance level is at around 2,000-2,010. On the other hand, the nearest level of support is at 1,985-1,990, marked by recent local lows. There have been no confirmed negative signals. However, we can see negative technical divergences, accompanied by overbought conditions:

Daily S&P 500 index chart - SPX, Large Cap Index

Expectations before the opening of today’s session are slightly negative, with index futures currently down 0.1-0.2%. The European stock market indexes have been mixed between -0.8% and 0.0% so far. The S&P 500 futures contract (CFD) Continues to fluctuate along the level of 2,000. The nearest important level of resistance remains at around 2,005-2,010, and the support level is at 1,990, among others:

S&P500 futures contract - S&P 500 index chart - SPX

The technology Nasdaq 100 futures contract (CFD) follows a similar path, as it trades slightly below the level of 4,100. The resistance level is at 4,100-4,115, and the nearest important level of support remains at 4,050-4,060, marked by recent local lows, as we can see on the 15-minute chart:

Nasdaq100 futures contract - Nasdaq 100 index chart - NDX

Concluding, the broad stock market remains relatively close to all-time high as the S&P 500 index continues to fluctuate along the level of 2,000. We remain bearish, expecting a downward correction or uptrend reversal. Therefore, we continue to maintain our speculative short position. The stop-loss is at the level of 2,030 and potential profit target is at 1,900 (S&P 500 index). 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.

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