Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): No positions are currently justified from the risk/reward point of view.

Stock prices went sideways on Wednesday, as investors hesitated after Monday’s-Tuesday’s rally. Today there may be more uncertainty and profit-taking action.

The S&P 500 index lost 0.20% on Wednesday after bouncing from the daily low of around 3,723. Stocks retraced their Tuesday’s advance of 3.1%, but they were just slightly lower at the end of the day. Yesterday, the daily high was at 3,806.91 and on Friday the index was the lowest since November of 2020. Friday’s daily low was at 3,584.13 – 13% below its September 12 local high of 4,119.28. There’s still a lot of fear concerning Central Banks’ tightening monetary policies, Russia-Ukraine war and an energy crisis. However, on Monday stock prices jumped on news that the UN called Central Banks to halt their monetary tightening plans, among other factors.

This morning the S&P 500 is expected to open 0.3% lower and we may see some more short-term uncertainty following Monday’s-Tuesday’s 6% rally from the local low.

Futures Contract – Short-Term Consolidation

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market continues to trade along the 3,800 level. For now, it looks like a short-term consolidation and a flat correction within an uptrend. The resistance level remains at 3,800-3,850, marked by the previous local lows.

In our opinion, no positions are currently justified from the risk/reward point of view. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index extended its short-term consolidation yesterday and this morning it is expected to open slightly lower. For now, it looks like a flat correction within a short-term uptrend. The market will be waiting for tomorrow’s monthly jobs data release. This morning we got slightly higher than expected Unemployment Claims release.

Here’s the breakdown:

• The S&P 500 trades within a consolidation; for now, it looks like a correction and profit-taking action within an uptrend.
• In our opinion, the short-term outlook is neutral.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): No positions are currently justified from the risk/reward point of view.

Thank you.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care