Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): long positions with entry at 4,340 price level, with 4,440 as the stop-loss (take profit) and 4,740 as the price target.

The S&P 500 index extended its short-term decline. Is this still a new downtrend or still just downward correction?

The broad stock market index lost 0.97% on Wednesday following its Tuesday’s decline of 1.3%. There is still a lot of uncertainty concerning the Ukraine conflict and Fed’s monetary policy tightening plans. The broad stock market’s gauge has been fluctuating within a consolidation after rallying from the March 14 local low of around 4,162 this week, but yesterday it broke below the recent lows. This morning the market is expected to open 0.2% lower, but we may see an intraday consolidation or a bounce.

Futures Contract Remains Below the 4,500 Level

Let’s take a look at the hourly chart of the S&P 500 futures contract. It broke below the upward trend line last week and it got back below its local highs from February. So is this a reversal? For now it still looks like a correction and we are maintaining our profitable long position from the 4,340 level. However, the market got very close to our stop-loss (take-profit) level yesterday. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index will likely open slightly lower this morning and it may get back to its yesterday’s daily low of around 4,450. Stocks went lower following Tuesday’s FOMC Member Brainard comments about reducing the Fed’s Balance Sheet. It still looks like a correction within an uptrend, however, it may also be a topping pattern before some more meaningful downward reversal. Therefore, we’ve recently moved our take-profit/ exit level upwards.

Here’s the breakdown:

• The S&P 500 index will likely open lower this morning and it may extend its short-term downtrend.
• We are maintaining our profitable long position (opened on Feb. 22 at 4,340).
• We are still expecting some upside from the current levels; however, it is time to get more cautious as there may be a bigger downward correction at some point.

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

Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): long positions with entry at 4,340 price level, with 4,440 as the stop-loss (take profit) and 4,740 as the price target.

Thank you.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care