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 bounced on Tuesday, as Russia-Ukraine tensions eased. Was it an upward reversal or just another move within a consolidation?

The S&P 500 index gained 1.58% on Tuesday, Feb. 15, as it retraced some of its last week’s Thursday’s-Friday’s declines. On Monday the index extended a short-term sell-off from last Wednesday’s local high of 4,590.03. Monday’s daily low was at 4,364.84 and the market retraced more than 100 points from that level.

The market went higher despite worse than expected producer Price Index release. This morning it is expected to open 0.1% lower following much better than expected Retail Sales number release. Investors will be waiting for the FOMC Meeting Minutes release at 2:00 p.m.

The nearest important resistance level is at 4,500, marked by the recent consolidation. The resistance level is also at around 4,550. On the other hand, the support level is at 4,350-4,400, among others. The S&P 500 index bounced from its late January consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Trades Along its Previous Local Lows

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reversed its short-term uptrend last week, and on Monday it traded as low as 4,360. Yesterday the market retraced some of that decline. Since then, it has been fluctuating above the 4,450 level.

In our opinion, no positions are currently justified from the risk/reward point of view. We are waiting for a potential speculative long position entry, but at lower levels or after some more consolidation. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index will likely open 0.1% lower this morning, following an overnight consolidation. For now, it looks like a consolidation within a short-term uptrend. The sentiment improved following easing Russia-Ukraine tensions. But will this uptrend continue? We may see more volatility, as the market gets closer to resistance levels.

Here’s the breakdown:

• The S&P 500 index will likely fluctuate following yesterday’s rebound. For now, it looks like a relatively flat 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