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.

Stocks are expected to open higher following long holiday weekend. Will they reverse their downtrend? There’s still a lot of uncertainty and no clear buying signals.

The S&P 500 index gained 0.22% on Friday, after going down to the new medium-term low of 3,636.87. It was 1,181.75 points or 24.5% below its Jan. 4 record high of 4,818.62. There’s still a lot of uncertainty and worries about inflation data, tightening Fed’s monetary policy and the Russia-Ukraine conflict. We will likely see more short-term fluctuations following the recent declines. The market will be waiting for tomorrow’s Fed Chair Powell’s Testimony, among other factors. This morning the S&P 500 index will likely open 1.2% above its Friday’s closing price following global stock markets’ rebound.

Futures Contract is Above 3,700 Again

Let’s take a look at the hourly chart of the S&P 500 futures contract. Last week it broke below the previous consolidation. The market reached new medium-term low on Friday, as it tumbled below the 3,700 level. We may see an attempt at retracing some more of the recent decline. The nearest important resistance level is at 3,800-3,850.

We will wait for an upward reversal pattern before entering a speculative long position.

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 open 1.2% higher this morning after a long holiday pause. Stocks may retrace some of their Friday’s sell-off, as there are still short-term oversold conditions. For now, it looks like an upward correction or just another consolidation within a downtrend.

Here’s the breakdown:

• The broad stock market is expected to open higher this morning; for now, it looks like an upward correction.
• 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