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.

The S&P 500 index got back closer to the 4,000 level again yesterday. This morning it’ll likely extend the advance. So is the market reversing its two-month-long downtrend?

The broad stock market index gained 0.95% on Wednesday, as it retraced its Tuesday’s decline of 0.8%. This week it rallied from last Friday’s low of 3,810.32. On Friday 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. This morning the S&P 500 index is expected to open 0.6% higher, so we will likely see an attempt at breaking above the 4,000 level.

Futures Contract is at the Trend Line

Let’s take a look at the hourly chart of the S&P 500 futures contract. It is trading slightly above the downward trend line. The market is at the resistance level of 4,000. The next important resistance level is at around 4,080, marked by the previous local high.

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 0.6% higher this morning despite slightly worse than expected GDP number release. So we may see an attempt at breaking above the recent consolidation. Overall, the broad stock market remains within a potential medium-term bottoming pattern.

Here’s the breakdown:

• The S&P 500 index will likely break above the 4,000 level this morning; there’s still a lot of uncertainty following April-May declines.
• 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