Uncertainty Following Sharp Rebound As Investors Take Short-Term Profits

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 1,975 and profit target at 1,875, S&P 500 index).

Our intraday outlook is now 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 U.S stock market indexes lost between 0.6% and 0.9% on Wednesday, retracing some of their recent move up, as investors took short-term profits off the table. Our yesterday’s bearish intraday outlook has proved accurate. The S&P 500 index bounced off resistance level at around 1,950, marked by the early October consolidation, among others. The next level of resistance is at 1,970-1,980, marked by previous local highs. On the other hand, the nearest important level of support is at 1,900-1,910, marked by Tuesday’s daily gap up, as we can see on the daily chart:

Expectations before the opening of today’s trading session are positive, with index futures currently up 0.4%. The main European stock market indexes have been mixed so far. Investors will now wait for some economic data announcements: Initial Claims at 8:30 a.m., FHFA Housing Price Index at 9:00 a.m., Leading Indicators, New Home Sales number at 10:00 a.m. The S&P 500 futures contract (CFD) is in an intraday uptrend, as it retraces some of yesterday’s move down. The nearest important level of resistance is at around 1,940-1,945, marked by local highs. On the other hand, the support level is at 1,920, among others, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) follows a similar path, as it trades closer to resistance level of 3,970-3,980. The next level of resistance is at around 4,000, and support level is at 3,940:

Concluding, the broad stock market retraced some of its recent move up as investors took short-term profits off the table. We expect some more downside following a sharp rebound off last week’s lows. Therefore, we continue to maintain our already profitable speculative short position with entry point at 1,941 (yesterday’s opening price of the S&P 500 index). Stop-loss level is at 1,975, and potential profit target is at 1,875 (S&P 500 index). It is important to set some exit price level in case some events cause the price to move in an unlikely direction. Having safety measures in place helps limit potential losses while letting gains grow.