Indexes Continued Their Sell-Off Following Declining Oil Prices

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,085 and profit target at 1,950, 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 U.S. stock market indexes lost between 1.1% and 1.8% on Friday, extending their short-term downtrend, as investors reacted to worsening global economic outlook following oil prices sell-off, among others. The S&P 500 index is the lowest since late October, as it trades close to the level of 2,000. The nearest important support level is at around 2,000, marked by the October 31st daily gap up of 1,999.4-2,001.2, among others. On the other hand, level of resistance remains at around 2,020-2,025, marked by recent local lows, as we can see on the daily chart:

Expectations before the opening of today’s trading session are positive, with index futures currently up 0.7-0.8%. The main European stock market indexes have gained 0.3-0.5% so far. Investors will now wait for some economic data announcements: Empire Manufacturing number at 8:30 a.m., Industrial Production, Capacity Utilization at 9:15 a.m., NAHB Housing Market Index at 10:00 a.m. The S&P 500 futures contract (CFD) is in an intraday uptrend, as it retraces some of its recent decline. The nearest important level of support is at around 1,990-2,000, and resistance level is at 2,020-2,030, among others, as the 15-minute chart shows:

The technology Nasdaq 100 futures contract (CFD) follows a similar path as it trades above the level of 4,200. The nearest important level of support remains at 4,180-4,200, and resistance level is at 4,250, among others:

Concluding, the broad stock market extended its short-term downtrend, as the S&P 500 index got closer to the level of 2,000. We continue to maintain our already profitable short position with entry point at 2,038 (November 12th opening price of the S&P 500 index). Stop-loss is at 2,085 and potential profit target is at 1,950 (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.