Trading position (short-term, our opinion; S&P 500 futures contract): In my opinion, the short-term outlook is bullish and long positions are still justified from the risk/reward point of view (since Feb. 27).

S&P 500 extended a short-term consolidation – which direction is next?

The S&P 500 index gained 0.1% yesterday as it continued to trade along 4,550 level following the recent rally. The market remained close to last Wednesday’s new medium-term local high of 4,568.43. On Wednesday it was the highest since August 1. Recently the S&P 500 broke above the resistance level marked by the technically important September 21 daily gap down of around 4,376-4,401. Stocks rallied despite uncertainty about monetary policy, economic growth and geopolitics. The market resumed its rally from October 27 local low of 4,103.78 and on Wednesday it reached another important resistance level, marked by the August 2 daily gap down of 4,550.93-4,567.53.

Stocks will likely open 0.5% higher today, so the S&P 500 may slightly extend its uptrend. It continues to trade below the steep upward trend line as we can see on the daily chart:

Futures Contract Reaches New High

Let’s take a look at the hourly chart of the S&P 500 futures contract. Last week on Monday it broke above the recent trading range above 4,500 level and it went close to the resistance level of around 4,550-4,570, marked by previous local high. Today the market is breaking higher following better-than-expected GDP number release, among other factors. The next resistance level is at 4,600. On the other hand, the support level is now at 4,540.

Conclusion

Stock prices will open higher today and the S&P 500 may break above its recent local high. There have been no confirmed negative signals so far. However, there are short-term overbought conditions that may lead to a correction at some point.

Here’s the breakdown:

• The S&P 500 will likely reach new medium-term high this morning.
• There may be a downward correction at some point.
• In my opinion, the short-term outlook is still bullish and long positions are still justified from the risk/reward point of view.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, our opinion; S&P 500 futures contract): In my opinion, the short-term outlook is bullish and long positions are still justified from the risk/reward point of view (since Feb. 27).

Thank you.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care