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 extended its rally yesterday, as investors’ sentiment improved following weaker U.S. dollar, among other factors. Today stocks may retrace some of their advances – is the uptrend over?
The S&P 500 index gained 3.06% on Tuesday, following its Monday’s rally of 2.6%, as it retraced more of the recent declines. The market got close to the 3,800 level yesterday. The daily high was at 3,791.92 and on Friday the index 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, on Monday stock prices jumped on news that the UN called Central Banks to halt their monetary tightening plans, among other factors.
This morning the S&P 500 will likely open 1.0% lower. For now, it looks like a downward correction following Monday’s-Tuesday’s 6% rally from the local low.
Futures Contract Trades Along 3,800
Let’s take a look at the hourly chart of the S&P 500 futures contract. Yesterday it broke slightly above the 3,800 level. This morning it’s trading just below that 3,800-3,850 resistance level. For now, it looks like a short-term profit-taking action.
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 be lower at the opening of today’s trading session. We may see a short-term consolidation following the unprecedented Monday’s-Tuesday’s 6% rally from the low. For now, it looks like a flat correction within a short-term uptrend. The market will be waiting for Friday’s monthly jobs data release. This morning we got slightly better than expected ADP Non-Farm Employment Change release.
Here’s the breakdown:
- The S&P 500 extended its Monday’s rally yesterday; today it may be pausing following the advances.
- 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
