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 further extended its downtrend yesterday on inflation, war fears. Will the market bounce from its late September lows?

The S&P 500 index lost 0.75% on Monday, following its Friday’s sell-off of 2.8%, as it got even closer to the September 30 new medium-term low of 3,584.13. Last week on Wednesday, the daily high was at 3,806.91 and stock prices reversed sharply lower after better-than-expected monthly jobs data release on Friday. 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 will likely open 0.2% lower, and we may see an attempt at retracing some of the recent sell-off. Investors will be waiting for Wednesday’s PPI, Thursday’s CPI, Friday’s Retail Sales releases, and the coming quarterly earnings season.

Futures Contract Fluctuates Along the Previous Low

Let’s take a look at the hourly chart of the S&P 500 futures contract. Last week it went above the 3,800, but on Friday it reversed almost all of the rally. Yesterday the market extended the decline, and this morning it’s bouncing from the support level of around 3,600.

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 are expected to open slightly lower this morning. We’ll likely see a consolidation following the recent sell-off. Investors will be waiting for economic data releases later in the week. For now, it looks like a flat correction within a downtrend. However, the market may also be forming a short-term bottom here.

Here’s the breakdown:

• S&P 500 got very close to its previous low yesterday; it’ll likely go sideways before the coming economic data releases.
• 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