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 retraced its late last week’s declines yesterday and it went closer to the 4,800 level again. Will it reach the new record high today?

The broad stock market index gained 0.64% on Monday, Jan. 3, as it retraced most of the recent decline from last Thursday’s record high of 4,808.93. Yesterday the index fell to the local low of 4,758.17, before advancing almost 40 points. The S&P 500 index remains way above the local highs from November and December. Stocks broke above the consolidation and we had a quick Santa Claus rally. The broad stock market’s gauge continues to trade within a short-term consolidation. For now, it looks like a relatively flat correction within an uptrend.

On Dec. 3 the index fell to the local low of 4,495.12 and it was 5.24% below the previous record high. So it was a pretty mild downward correction or just a consolidation following last year’s advances.

The nearest important resistance level remains at around 4,800-4,810. On the other hand, the support level is at 4,740-4,750, marked by the previous highs. Recently the S&P 500 broke above its two-month long consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Apple’s Market Cap Tops $3 Trillion

Apple stock reached the new record high of $182.88 yesterday, as it broke slightly above the Dec. 13 high of $182.13. The stock remains above its two-month long upward trend line. There have been no confirmed negative signals so far, however, the market may be trading within a medium-term topping pattern. It’s getting very hard to fundamentally justify the Apple’s current market capitalization of around $3 trillion.

Futures Contract - New Record High

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the new record high this morning and it broke above the last week’s local highs. On Friday the market got closer to the broken resistance level, and it acted as a level of support. 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 0.3% higher this morning, but we may see some short-term uncertainty and a further consolidation along the 4,800 level. There have been no confirmed negative signals so far.

Here’s the breakdown:

• The S&P 500 will likely extend its short-term consolidation along the 4,800 level.
• 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