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 S&P 500 index reversed its Wednesday’s rally completely. Is this still a volatile bottoming pattern or just pause within a downtrend?
The S&P 500 index lost 2.1% on Thursday after gaining 2.0% on Wednesday, as it got back to the lows of the medium-term downtrend. Yesterday it fell to the new low of 3,610.40 and it was the lowest since November of 2020 – 508.9 points or 12.4% 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.
This morning the S&P 500 is expected to open 0.1% higher following mixed economic data releases. So we will likely see more uncertainty and volatility.
Futures Contract Continues to Fluctuate
Let’s take a look at the hourly chart of the S&P 500 futures contract. On Wednesday it went to the new low of around 3,613, but news from the Bank of England sent global markets higher. Yesterday the market retraced almost all of the advance and it came back closer to the support level of 3,600. On the other hand, the resistance level remains at 3,700-3,750.
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 will likely open virtually flat this morning. We may see some more uncertainty and a short-term consolidation. There’s still a lot of uncertainty and fear, but a clearly bearish sentiment points to a bottom forming.
Here’s the breakdown:
- The S&P 500 retraced its Wednesday’s advance yesterday; we may see more volatility as a quarter ends.
- 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
