Trading position (short-term, our opinion; S&P 500 futures contract): In my opinion, the short-term outlook is bullish and long positions are still justified from the risk/reward point of view (since Feb. 27).

Stocks extend their short-term consolidation – is this just a pause before another leg up?

The S&P 500 index lost 0.20% on Monday as it went sideways again following its recent rally. The market remained close to last Wednesday’s new medium-term local high of 4,568.43. On Wednesday it was the highest since August 1. Recently the S&P 500 broke above the resistance level marked by the technically important September 21 daily gap down of around 4,376-4,401. Stocks rallied despite uncertainty about monetary policy, economic growth and geopolitics. The market resumed its rally from October 27 local low of 4,103.78 and on Wednesday it reached another important resistance level, marked by the August 2 daily gap down of 4,550.93-4,567.53.

Stocks are expected to open 0.1% lower today, so the index will further extend its fluctuations. The S&P 500 trades below its steep upward trend line as we can see on the daily chart:

Futures Contract Remains Close to 4,550

Let’s take a look at the hourly chart of the S&P 500 futures contract. Last week on Monday it broke above the recent trading range above 4,500 level and it went close to the resistance level of around 4,550-4,570, marked by previous local high, among others. The next resistance level is at 4,600. On the other hand, the support level remains at 4,500-4,520.

Conclusion

The S&P 500 will likely extend a consolidation this morning. The markets are waiting for the important CB Consumer Confidence release at 10:00 a.m.

There have been no confirmed negative signals so far. However, there are short-term overbought conditions that may lead to a correction at some point.

Here’s the breakdown:

• The S&P 500 trades close to its last week’s new medium-term local high.
• There may be a downward correction at some point.
• In my opinion, the short-term outlook is still bullish and long positions are still justified from the risk/reward point of view.

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

Trading position (short-term, our opinion; S&P 500 futures contract): In my opinion, the short-term outlook is bullish and long positions are still justified from the risk/reward point of view (since Feb. 27).

Thank you.

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