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 extended their uptrend again yesterday, but the S&P 500 index gained just 0.2%. Today it will retrace most of its recent advance, so is this a new downtrend or just a correction?

The S&P 500 index gained 0.19% on Tuesday, as it extended a short-term uptrend after breaking above the 4,300 level. It reached new medium-term high of 4,325.28 yesterday and it was the highest since late April. The S&P 500 extended its two-month-long uptrend from the medium-term low of 3,636.87 (June 17) despite ongoing worries about inflation, tightening Fed’s monetary policy, Russia-Ukraine conflict. But this morning the S&P 500 is expected to open 1.0% lower and it will get back below the 4,300 level.

Futures Contract Breaks Below the Trend Line

Let’s take a look at the hourly chart of the S&P 500 futures contract. It broke below the recent upward trend line this morning. The resistance level remains at around 4,300 and the support level is at 4,200, among others.

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 open much lower today following mixed Retail Sales number release, among other factors. So we will see a profit-taking action after the recent rally. For now, it looks like a correction within an uptrend.

Here’s the breakdown:

• The S&P 500 will likely get back below the 4,300 level this morning; for now it looks like a downward 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