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 is expected to open lower this morning following the U.S. inflation number release. Is this a downward reversal or just a correction?
The broad stock market index gained 1.45% on Wednesday, as it broke above a week-long consolidation. The S&P 500 got close to the previous Wednesday’s local high of 4,595.31. This morning the market is expected to open 0.9% lower after the Consumer Price Index release. The inflation data was higher than expected at +0.6% m/m. So the broad stock market will get back to the recent consolidation and closer to the 4,500 level again. For now, it looks like a downward correction.
The nearest important resistance level remains at around 4,580-4,600. On the other hand, the support level is at 4,500. The support level is also at 4,400-4,450. The S&P 500 index remains close to the November – December 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 broke above the short-term downward trend line in late January before rallying up to around the 4,600 level. Yesterday it traded closer to the Wednesday’s high of 4,586, and this morning it is retracing some of the advance.
The market remains at the resistance level of its previous local lows, but there have been no confirmed negative signals so far. So 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 retrace most of its yesterday’s rally following a breakout above its week-long consolidation. The market reacts on higher than expected inflation number release.
The quarterly earnings season is mostly over now, and there is still an uncertainty concerning Russia-Ukraine tensions.
Here’s the breakdown:
- The S&P 500 index will likely retrace its yesterday’s advance, but it may remain above the recent consolidation.
- 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
