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 retraced their Wednesday’s rebound and they dived to new medium-term lows yesterday. Today they’re expected to open higher, but it may be just another upward correction.

The S&P 500 index lost 3.25% on Thursday, after gaining 1.5% on Wednesday, as it retraced the whole post-Fed’s decision rally and it reached new medium-term low of 3,639.77. The index was 1178.9 points or 24.5% below its Jan. 4 record high of 4,818.62 yesterday.

There’s still a lot of uncertainty and worries about inflation data, tightening Fed’s monetary policy and the Russia-Ukraine conflict. We will likely see more short-term volatility, as today is the quadruple witching Friday when derivatives of stock index futures, stock index options, stock options, and single stock futures expire. This morning the S&P 500 index is expected to open 0.7% higher. We may see an intraday rebound following yesterday’s sell-off.

Futures Contract Trades Along 3,700

Let’s take a look at the hourly chart of the S&P 500 futures contract. It was trading within a consolidation above the 4,080 level last week, and on Thursday it broke lower. The market reached new medium-term low this morning, as it broke below the 3,700 level. We may see an attempt at retracing some of the decline this morning. The nearest important resistance level is at 3,800-3,850.

We will wait for an upward reversal pattern before entering a speculative long position.

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 will likely open 0.7% higher this morning. Stocks may retrace some of their yesterday’s sell-off, as there are some clear short-term oversold conditions. For now, it looks like an upward correction or another consolidation within a downtrend.

Here’s the breakdown:

• The S&P 500 index is expected to open higher this morning; the market will likely retrace some of its Thursday’s sell-off.
• 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