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.

S&P 500 extended a short-term downtrend on Monday, but the market bounced from its late January consolidation. Was this an upward reversal?

The S&P 500 index lost 0.38% on Monday, Feb. 14 following its Friday’s decline of 1.9%, as it extended a short-term sell-off from the last Wednesday’s local high of 4,590.03. Yesterday’s daily low was at 4,364.84 and the closing price was above the 4,400 level.

Investors reacted to the Thursday’s inflation release and further Russia-Ukraine crisis news. The market fears that the rising inflation will lead to a faster tightening by the Fed. This morning the index will likely open 1.3% higher following an overnight global stock markets’ rally amid easing Russia-Ukraine tensions. However, it retraced some of the advance after higher than expected Producer Price Index release.

The nearest important resistance level is at 4,450-4,500, 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 retraced most of its breakout above the late January consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Bounces From the 4,400 Level

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 yesterday it traded as low as 4,360. It looks like a correction or a consolidation after the late January sell-off. However, there have been no confirmed short-term positive signals so far.

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 more consolidation. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index will likely open 1.3% higher and it will likely retrace some of its last week’s Thursday’s-Friday’s declines. The sentiment improved following easing Russia-Ukraine tensions. But will this uptrend continue? We may see some more volatility, as the markets may focus in inflation fears again – today’s PPI release was at +1.0% m/m vs. the expected +0.5% m/m.

Here’s the breakdown:

• The S&P 500 index will likely retrace some of its recent declines this morning, but we may see more volatility later in the day.
• 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