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 reversed their short-term uptrend yesterday. So is the upward correction over? This morning’s Retail Sales release will drive us even lower.

The S&P 500 index lost 1.42% on Thursday, as it got back below the 4,700 level again. The broad stock market reversed its short-term uptrend and it is poised to open lower this morning following much worse than expected Retail Sales number release and quarterly earnings releases. Earlier in the week the S&P 500 index bounced from the Monday’s local low of 4,582.24 and it retraced more than half of the recent decline. It continues to trade within an over two-month long consolidation. Late December – early January consolidation along the 4,800 level was a topping pattern and the index fell to its previous trading range.

The nearest important resistance level is now at around 4,700 again. On the other hand, the support level is at 4,580-4,600, marked by the recent local low. The S&P 500 is still trading within a medium-term consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Gets Closer to its Previous Low

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market retraced its recent advance and it’s getting closer to the recent local low of around 4,575. 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 1.0% lower following worse-than-expected Retail Sales release. So it will get close to the recent local lows and the support level of around 4,580-4,600. There have been no confirmed short-term positive signals so far. However, we may see an intraday rebound later in the day.

Here’s the breakdown:

• The S&P 500 will likely retrace more of its recent advance and it may get back below the 4,600 level following economic data, quarterly earnings releases.
• 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