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.

Stocks fluctuated within a consolidation last week. Is this a short-term bottoming pattern or just a pause before another leg down?

The S&P 500 index lost 0.27% on Friday, as it continued to trade along the 4,500 level. There is still a lot of uncertainty concerning the Ukraine conflict and Fed’s monetary policy tightening plans. However, the coming quarterly earnings releases season may be a positive factor. The S&P 500 index has been fluctuating within a consolidation after rallying from the March 14 local low of around 4,162 recently, but on Wednesday it broke below its short-term lows. This morning the broad stock market is expected to open 0.6% lower.

Futures Contract Trades Along the Local Lows

Let’s take a look at the hourly chart of the S&P 500 futures contract. Recently it broke below the upward trend 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 is very close to our stop-loss (take-profit) level. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index is expected to open 0.6% lower this morning following global stock markets’ weakness. 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 continues to trade within a short-term consolidation; however, the market is closer to breaking lower.
• 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