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 extended their sell-off following Wednesday’s Fed’s interest rate hike. This morning we may see more downside, but a short-term bottom may be in sight.
The S&P 500 index lost 0.84% on Thursday, as it extended its Wednesday’s decline of 1.7% following Fed’s monetary policy tightening. The broad stock market index reached new medium-term low of 3,749.45 and it was almost 370 points below the last Monday’s local high of 4,119.28.
The S&P 500 index is expected to open 1.3% lower, so we will see much more downside this morning. The market may be approaching a temporary bottom, as it gets closer to medium-term lows from June. Investors will be waiting for the important PMI releases at 9:45 a.m. and a speech from the Fed Chair Powell at 2:00 p.m.
Futures Contract Accelerates the Downtrend
Let’s take a look at the hourly chart of the S&P 500 futures contract. On Wednesday it broke below the recent trading range. Yesterday it broke below the 3,800 level. It is the nearest important resistance level right now.
There have been no confirmed positive signals so far, however there are some short–term oversold conditions that may lead to a bounce at some point.
In our opinion, no positions are currently justified from the risk/reward point of view. (chart by courtesy of http://tradingview.com):
Conclusion
Stock prices are likely to extend their downtrend this morning. The sentiment remains bearish following Wednesday’s interest rate hike, but some clear oversold conditions point to bounce or a consolidation in the near term.
Here’s the breakdown:
- The S&P 500 will open much lower this morning; the market may be approaching a short-term bottom.
- 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
