Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): long positions with entry at 4,340 price level, with 4,120 as a stop-loss and 4,640 as an initial price target.

Stocks were volatile yesterday and the broad stock market fell by another 1%. Was it a final decline or just another leg within a downtrend?

The S&P 500 index lost 1.01% on Tuesday, Feb. 22, as it extended its last week’s Thursday’s-Friday’s sell-off. The daily low was at 4,267.11, and the market closed slightly above the 4,300 mark. We’ve seen a lot of volatility following the U.S. President Biden’s speech on Russia-Ukraine conflict. This morning the S&P 500 index is expected to open 0.7% higher. We may see more volatility, however it looks like a short-term bottoming pattern.

The nearest important resistance level is at 4,350-4,400, marked by the recent local low and some previous support levels. On the other hand, the support level is at 4,250-4,300, among others. The S&P 500 index trades within its late January consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract – Short-Term Consolidation

Let’s take a look at the hourly chart of the S&P 500 futures contract. It extended the downtrend on Monday, but it managed to stay slightly above its late January local lows. For now, it looks like a short-term consolidation. It may be a bottoming pattern before an upward correction.

Yesterday, we decided to open a speculative long position before the opening of the cash market (4,340 price level). Stop loss and profit target levels are wider than usual because of an increased volatility. We are expecting an upward correction from the current levels (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index went below the 4,300 level yesterday, as investors reacted to the ongoing Russia-Ukraine crisis news. The market may be trading within a short-term consolidation and we may see an attempt at reversing the downtrend.

Here’s the breakdown:

• The S&P 500 index will likely bounce or fluctuate following its late last week’s sell-off
• We are maintaining our yesterday’s long position (4,340 price level).
• We are expecting an upward correction from the current levels.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): long positions with entry at 4,340 price level, with 4,120 as a stop-loss and 4,640 as an initial price target.

Thank you.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care