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 continued to rise on Friday and the S&P 500 accelerated its advance after breaking above the 4,100 level. Did the market get “too high too fast”?
The S&P 500 index gained 2.47% on Friday, after breaking above the 4,100 level. The index continued to rally from the previous Friday’s low of 3,810.32. On May 20 it was 1,008.3 points or 20.9% below the Jan. 4 record high of 4,818.62. So technically, the broad stock market has entered a bear market territory. There’s still a lot of uncertainty and worries about inflation data, tightening Fed’s monetary policy and the Russia-Ukraine conflict. However, stocks accelerated their uptrend last week. Today, the S&P 500 index futures contract is trading 0.5% higher. Obviously, a lot can happen by tomorrow when the cash market opens after a holiday break.
Futures Contract Broke Above its Recent High
Let’s take a look at the hourly chart of the S&P 500 futures contract. It broke above the downward trend line last week. On Friday it rallied above the previous local high and today it is trading closer to the 4,200 level. This acts as a resistance level.
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 futures contract is trading higher this morning, however it retraced some of the overnight advance. We can see short-term overbought conditions that could lead to a profit-taking action and a correction of the recent rally.
Here’s the breakdown:
- The broad stock market index retraced more of its previous declines on Friday; short-term overbought may lead to a correction at some point.
- 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
