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.

Stocks extended its short-term downtrend on Monday, but yesterday’s daily trading range was much smaller than on Friday. So was it a bottom or just another flat correction?

The S&P 500 index lost 0.67% on Monday, as it slightly extended its downtrend following Friday’s 3.4% sell-off after the Fed Chair Powell’s speech. On Thursday the market bounced up to the 4,200 level - a potential short-term resistance level. Then on Friday it broke below its recent local lows.

In the first half of the month the S&P 500 was extending its two-month-long uptrend from the medium-term low of 3,636.87 (June 17) despite ongoing worries about inflation, tightening Fed’s monetary policy, Russia-Ukraine conflict. On August 16 it reached the local high of 4,325.28, and on Friday, the new local low fell at 4,057.66. Yesterday the market fell to the new local low of 4,017.42. This morning the S&P 500 index is expected to open 0.5% higher and we may see another short-term consolidation.

Futures Contract Bounced From 4,000

Let’s take a look at the hourly chart of the S&P 500 futures contract. Yesterday it bounced from the 4,000 level. For now, it looks like a relatively flat correction within a downtrend. The resistance level remains at around 4,100-4,120, among others.

In our opinion, no positions are currently justified from the risk/reward point of view. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index is expected to open 0.5% higher this morning and it may see a short-term consolidation following the recent sell-off. There have been no confirmed positive signals so far. However, the market seems oversold and we may see some further fluctuations or a rebound at some point.

Here’s the breakdown:

• Stock prices will likely fluctuate following their recent sharp sell-off; the S&P 500 index remains above the support level of 4,000.
• In our opinion, no positions are currently justified from the risk/reward point of view.

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