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 sold off on Monday on better economic data. Is this a topping pattern?

The broad stock market index lost 1.79% yesterday, as it retraced most of its last Wednesday’s rally. The market reacted to better-than-expected ISM Services PMI release. On Thursday the S&P 500 reached new local high of 4,100.51, and on Monday it went slightly below the 4,000 level.

This morning the S&P 500 is expected to open virtually flat, so we will likely see more short-term uncertainty. It still looks like a consolidation within an uptrend. The index fell closer to its two-month-long upward trend line, as we can see on the daily chart:

Futures Contract Trades Along 4,000

Let’s take a look at the hourly chart of the S&P 500 futures contract. It retraced most of the recent advances. The support level is still at 3,950-4,000.

Conclusion

The S&P 500 index retreated from its Thursday’s local high of around 4,100 yesterday. Stock prices went lower, as investors reacted to better-than-expected economic data. There’s still a lot of fear and uncertainty about the Fed’s tightening monetary policy.

Here’s the breakdown:

• Stock prices retraced their recent advances yesterday.
• We may see some more uncertainty this morning, as the S&P 500 trades along 4,000.
• 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