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 extended its rally on Friday despite short-term overbought conditions. Is this a buyers’ euphoria that will put an end to the medium-term uptrend?

The S&P 500 index gained 0.37% on Friday, Nov. 5, after reaching yet another new record high of 4,718.50. The rally is still not broad-based and it’s driven by a handful of tech stocks like MSFT, NVDA, TSLA. The market seems overbought in the short-term and most likely it’s still trading within a topping pattern. Today we may see a consolidation or a downward correction following the expected decline in TSLA shares after Elon Musk’s Twitter followers voted in favor of selling 10% of his stake.

The nearest important support level is now at 4,650-4,675 and the next support level is at 4,600. On the other hand, a potential resistance level is now at 4,700-4,720. The S&P 500 trades above a steep short-term upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Nasdaq Extended the Advance Above 16,000 Mark

Let’s take a look at the Nasdaq 100 chart. The technology index broke above the 16,000 level recently and it is trading at the new record high. The market accelerated parabolically above its short-term upward trend line, as we can see on the daily chart:

Apple’s Consolidation and Microsoft’s Potential Topping Pattern

Let’s take a look at the two biggest stocks in the S&P 500 index, AAPL and MSFT. Apple continues to trade within a consolidation along the $150 level and it is still well below the record highs, and the Microsoft keeps reaching new record highs. So the tech “megacaps” remain mixed, as we can see on their daily charts:

Short Position Was Closed at the Stop-Loss Level

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market broke slightly above the 4,700 level on Friday. It remains above a week-long upward trend line.

Our short position was closed at the stop-loss level of 4,680 on Friday. In our opinion no positions are currently justified from the risk/reward point of view. (chart by courtesy of http://tradingview.com):

Conclusion

The broad stock market extended its uptrend on Friday and it reached yet another new record high. It still looks like a topping pattern and we may see a consolidation or a downward correction at some point. There may be a profit-taking action following quarterly earnings releases. Today the main indices are expected to open 0.1-0.2% higher and we may see an attempt at breaking above Friday’s record highs. However, a consolidation is likely later in the day.

Here’s the breakdown:

• The S&P 500 extended its uptrend on Friday, and today it is expected to open 0.1% higher despite the negative TSLA stock news.
• Our speculative short position was closed at the stop-loss level on Friday.

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