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 once again yesterday, but this morning we’ll see a downward correction. So is the uptrend over?

The broad stock market index gained 1.06% on Monday, as it further extended its short-term uptrend following last week’s Thursday’s breakout above the 4,000 level. On Wednesday the market bounced from the 3,900 level and on Monday it reached the local high of 4,119.28. It remains well below the August 16 local high of 4,325.28.

This morning the S&P 500 index is expected to open 1.8% lower following worse-than-expected Consumer Price Index release. For now, it looks like a sharp downward correction.

Futures Contract – Closer to 4,000 Again

Let’s take a look at the hourly chart of the S&P 500 futures contract. It went up to the 4,175 level before this morning’s CPI release. Then the market sold off below the 4,100 level again. The support level is at 4,000, 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 is expected to open much lower this morning. For now, it looks like a sharp downward correction within a short-term uptrend. However, the market may re-test the support level of 4,000 and if it breaks lower, we may see some more downside.

Here’s the breakdown:

• Stocks will likely sell off 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