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 entered a downward correction on Friday, as investors took profits off the table following strengthening U.S. dollar. Will the S&P 500 continue to slide lower today?

The S&P 500 index lost 1.29% on Friday, as it retraced some of its recent advances after breaking below the 4,250 level. 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 August 16 it reached a local high of 4,325.28. This morning stocks will likely extend their declines, as the S&P 500 is expected to open 1.2% lower and break below the 4,200 level.

Futures Contract Trades Below 4,200

Let’s take a look at the hourly chart of the S&P 500 futures contract. It retraced its recent advances and right now it’s trading along the previous local highs. The support level is at around 4,180, and the next support level remains at 4,100-4,120.

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 is expected to open much lower this morning, as it will likely extend its short-term downtrend. It still looks like a correction within an over two-month-long uptrend. However, we may see a deeper retracement of July-August rallies.

Here’s the breakdown:

• The S&P 500 will extend its short-term downtrend this morning; for now, it looks like a downward correction and a profit-taking action.
• 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