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 trade within a volatile consolidation following the recent declines. So is this a bottoming pattern or just a flat correction? There’s still a lot of uncertainty.

The S&P 500 index gained 2.45% on Tuesday, as it retraced its last week’s Wednesday’s-Friday’s decline to new medium-term low of 3,636.87. On Friday the market was 1,181.75 points or 24.5% below its Jan. 4 record high of 4,818.62. And yesterday it bounced up to around 3,780. There’s still a lot of uncertainty and worries about inflation data, tightening Fed’s monetary policy and the Russia-Ukraine conflict. Today we will get the important Fed Chair Powell’s Testimony at 9:30 a.m. This morning the S&P 500 index will likely open 1.6% below its yesterday’s closing price, so we will see more short-term fluctuations following the recent declines.

Futures Contract – Short-Term Consolidation

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. Yesterday it bounced, but the nearest important resistance level remains 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 broad stock market index is expected to open 1.6% lower this morning following global stock markets’ weakness. We will likely see more short-term fluctuations. For now, it looks like a consolidation within a downtrend or a bottoming pattern.

Here’s the breakdown:

• The S&P 500 index will likely open lower this morning, as it is expected to extend a short-term consolidation; there will be a testimony from the Fed Chair Powell at 9:30 a.m.
• 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