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 rallied on Monday, as they retraced their recent declines on weaker U.S. dollar, UN call on Fed, Central Banks to halt interest rates hikes. But was it a reversal or just another upward correction?
The S&P 500 index gained 2.59% on Monday, following its Thursday’s and Friday’s declines of 2.1% and 1.5%, as it got back closer to the 3,700 level. On Friday it was the lowest since November of 2020. Friday’s daily low was at 3,584.13 – 13% 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. However, stock prices jumped on news that the UN called Central Banks to halt their monetary tightening plans.
This morning the S&P 500 is expected to open 1.3% higher. So we will likely see more advances in the morning, however, there may be a profit-taking action later in the day.
Futures Contract Broke Above the Trend Line
Let’s take a look at the hourly chart of the S&P 500 futures contract. Yesterday it broke above the downward trend line, and this morning it’s trading above the 3,700 level and along its recent local high. The next resistance level is at around 3,800-3,850.
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 1.3% higher this morning. So it will extend its yesterday’s rebound and we may see an attempt at breaking above the recent local high of around 3,735. However, it still looks like a correction within a downtrend or a consolidation.
Here’s the breakdown:
- The S&P 500 retraced most of its last week’s declines yesterday; it still looks like a correction within a downtrend.
- 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
