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.
Stock prices suffered very deep losses yesterday, as investors reacted to a worse-than-expected inflation data release. Will the S&P 500 resume its August downtrend?
The S&P 500 index lost 4.32% on Tuesday, as it retraced almost all of its recent advances. It sold off well below the 4,000 level and on Monday its daily high was at 4,119.28. Yesterday’s low was at 3,921.28. and last week the market bounced from the 3,900 level. So it is still well below the August 16 local high of 4,325.28.
This morning the S&P 500 index will likely open 0.3% higher following Producer Price Index release. The data was generally as expected. We may see a consolidation and attempts at retracing some of yesterday’s huge sell-off.
Futures Contract Is Closer to its Previous Local Lows Again
Let’s take a look at the hourly chart of the S&P 500 futures contract. Yesterday it went up to the 4,175 level before the CPI release. Then the market sold off below the 4,000 level. It still marks the nearest important resistance level. On the other hand, the support level is at 3,880-4,000, marked by the previous local low.
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 will likely open slightly higher and we may see a short-term consolidation following yesterday’s 4.3% sell-off. For now, it looks like bounce within a downtrend. There have been no confirmed positive signals so far. However, we may see a rebound at some point today.
Here’s the breakdown:
- Stocks sold off sharply following inflation data release, the S&P 500 may struggle below the 4,000 level again.
- 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
