Trading position (short-term, my opinion; S&P 500 futures contract): In my opinion, the short-term outlook is neutral and no positions are currently justified from the risk/reward point of view.

The S&P 500 sold off on Tuesday – is this a new downtrend?

The broad stock market index lost 2.00% yesterday, as it broke slightly below the 4,000 level. Stocks sold off despite their Friday’s intraday rebound, and they were selling off until the end of the trading session. There are renewed fears about monetary policy tightening following a series of better-than-expected economic data releases.

Last week on Tuesday the index bounced from a local high of around 4,160 and yesterday it broke below its short-term trading range. Stocks accelerated their downward correction from the S&P 500’s February 2 new medium-term high of 4,195. Earlier the broad stock market’s gauge was extending its bounce from January 19 local low of 3,885.54.

The S&P 500 index is expected to open 0.1% higher this morning. So we may see a consolidation following the sell-off. There have been no confirmed positive signals. In early February the index broke below the upward trend line, as we can see on the daily chart:

Futures Contract Remains Slightly Above 4,000

Let’s take a look at the hourly chart of the S&P 500 futures contract. It came back to the 4,000 level yesterday, after breaking below the local lows along the 4,060 level. The nearest important support level is at 4,000, and the resistance level is now at 4,060-4,100.

Conclusion

Stocks will likely open virtually flat this morning, but that may be just a pause within a downtrend, as there have been no confirmed positive signals so far. However, it still looks like a correction of the previous advances.

Here’s the breakdown:

• The S&P 500 index sold off on Tuesday, as it broke slightly below the 4,000 level.
• Stock prices are likely to rebound or fluctuate at today’s open, but this may be just a correction within a downtrend.
• In my opinion, the short-term outlook is neutral and no positions are justified from the risk/reward point of view.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, my opinion; S&P 500 futures contract): In my opinion, the short-term outlook is neutral and 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