Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): long positions with entry at 4,340 price level, with 4,020 as a stop-loss and 4,640 as an initial price target.

Stocks were very volatile last week, as investors closely watched the Ukraine news. Did the market finally reach the bottom?

The S&P 500 index gained 2.24% on Friday, after gaining 1.5% on Thursday, as investors’ sentiment improved following Thursday’s upward reversal. On Thursday, the broad stock market reached the low of 4,114.65 and it was 704 points or 14.6% below the January 4 record high of 4,818.62. And on Friday it went closer to the 4,400 level. For now, it looks like an upward correction. However, it may also be a more meaningful reversal following the mentioned 15% correction from the early January record high.

The market sharply reversed its short-term downtrend, but will it continue the advance? This morning the S&P 500 index is expected to open 1.4% lower and we may see more volatility.

The nearest important resistance level is now at 4,400 and the next resistance level is at 4,450-4,500. On the other hand, the support level is at 4,300-4,350, among others. The S&P 500 index broke slightly above the downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Remains Close to the 4,300 Level

Let’s take a look at the hourly chart of the S&P 500 futures contract. On Thursday it sold off after breaking below the 4,200 level. This morning it is trading below the Friday’s local high, however, it remains above the 4,300 mark.

The market bounced from our previous stop-loss level of 4,120. On Thursday, due to an extraordinary volatility we decided to move the stop-loss down to the 4,020 level (one time only). We are still expecting an upward correction from the current levels (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index is expected to open 1.4% lower this morning, as Russia-Ukraine conflict is still dominating the news. We’ve seen a short-term bottom on Thursday, however there will likely be more volatility.

Here’s the breakdown:

• The S&P 500 index bounced from the new low on Thursday after falling almost 15% from the early January record high.
• We are maintaining our speculative long position (opened on last Tuesday at 4,340)
• We are expecting an upward correction from the current levels.

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

Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): long positions with entry at 4,340 price level, with 4,020 as a stop-loss and 4,640 as an initial price target.

Thank you.

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