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.

The broad stock market sold off on Friday following hawkish Fed Chief Powell speech at the Jackson Hole Symposium. Will the downtrend continue? Or was it a panic bottom before a reversal?

The S&P 500 index lost 3.37% on Friday, after retracing its Thursday’s advance of 1.4%, as stock selling accelerated following the Fed Chief Powell’s speech. On Thursday the market bounced up to the 4,200 level - a potential short-term resistance level. Then on Friday it broke below the recent local low of around 4,120.

In the first half of the month the S&P 500 was extending its two-month-long uptrend from the medium-term low of 3,636.87 (June 17) despite ongoing worries about inflation, tightening Fed’s monetary policy, Russia-Ukraine conflict. On Tuesday, August 16 it reached the local high of 4,325.28, and on Friday, the new local low fell at 4,057.66. This morning the S&P 500 index is expected to open 0.6% lower, so we will see new short-term lows.

Futures Contract – Consolidation Following a Sell-Off

Let’s take a look at the hourly chart of the S&P 500 futures contract. It extended its short-term downtrend this morning, as it got closer to the 4,000 support level. On the other hand, the resistance level remains at 4,100-4,120, among others.

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 will likely open lower this morning and it will see new local lows following Friday’s sell-off of over 3%. There have been no confirmed positive signals so far. However, the market seems oversold and we may see a consolidation or rebound at some point.

Here’s the breakdown:

• The S&P 500 index accelerated its short-term downtrend on Friday; today we’ll likely see new local lows, but the market may remain above the 4,000 level.
• In our opinion, no positions are currently justified from the risk/reward point of view.

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