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.

Stocks extended their downtrend once again on Tuesday, as the S&P 500 fell below the 4,000 level. Is this still just a correction within the medium-term uptrend?

The S&P 500 index lost 1.1% on Tuesday, after a failed intraday rebound. The broad stock market was the lowest since late July yesterday. It extended its decline following Friday’s sell-off in a reaction to the Fed Chair 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 its recent local lows.

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 the local high of 4,325.28, and yesterday the market fell to the new local low of 3,965.21. Today the index will likely open 0.4% higher following worse than expected ADP Non-Farm Employment Change number release, and we may see a short-term consolidation along the 4,000 level.

Futures Contract Trades Close to 4,000

Let’s take a look at the hourly chart of the S&P 500 futures contract. Yesterday it fell below the 4,000 level. Since then it has been fluctuating along the 3,980 level. The resistance level is at 4,050-4,080, 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 bounce at today’s opening of the trading session. There have been no confirmed positive signals so far. However, the market seems oversold and we may see some further fluctuations or a rebound at some point.

Here’s the breakdown:

• The S&P 500 index fell below the 4,000 level yesterday; we may see a rebound at some point.
• 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