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 uptrend on Friday, as it got closer to the 4,300 level. Will it reach that level despite some short-term overbought conditions?

The broad stock market index gained 1.73% on Friday, as it accelerated its uptrend after Thursday’s consolidation. The S&P 500 index was the highest since May 4 on Friday and its new local high was at 4,280.47. The S&P 500 extended a 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. This morning the index is expected to open 0.8%. We will likely see a downward correction or another short-term consolidation.

Futures Contract Trades Along 4,250

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the new high on Friday, and this morning the market is backing off from that high. The resistance level remains at 4,280-4,300, and on the other hand, the support level is at 4,200.

In our opinion, no positions are currently justified from the risk/reward point of view. (chart by courtesy of http://tradingview.com):

Conclusion

Stocks will likely retrace some of their Friday’s advances this morning. We’ll likely see a downward correction or a consolidation following the recent rally. There’s more uncertainty, as investors take profits off the table amid short-term overbought. However, there have been no confirmed negative signals so far.

Here’s the breakdown:

• S&P 500 index will retrace some of its Friday’s rally 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