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 are likely to open relatively flat to lower following long holiday weekend and Monday’s futures contract’s advance. Is this a topping pattern?

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 0.9% lower after gaining 0.5% on Monday. So we will likely see a slightly lower opening of the trading session.

Futures Contract – Short-Term Correction

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the 4,200 level yesterday, and this morning it is trading around 70 pints lower. So there’s some volatility following the recent rally. For now, it looks like a correction within an uptrend.

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 slightly lower today. The broad stock market index may retrace some of its last week’s advances and yesterday’s futures contract’s rally has been completely retraced. There’s still a lot of uncertainty concerning inflation data, Fed’s tightening plans. Investors will be waiting for this Friday’s monthly jobs data release and the June 15 FOMC’s interest rate decision.

Here’s the breakdown:

• The S&P 500 index will likely retrace some of its last week’s advances this morning; for now, it looks like a downward correction.
• 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