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 were gaining on Tuesday, as they extended a short-term consolidation following the recent rally. So, will the rally continue?

The S&P 500 index gained 0.84% on Tuesday, as it broke above the 4,500 level again. Last week the broad stock market’s gauge retraced some of its recent rally, as it fell to the Friday’s local low of 4,451.50. The market found its short-term bottom after reversing from last Wednesday’s local high of 4,595.31. This morning the S&P 500 index is expected to open 0.9% higher and we may see an attempt at breaking above the short-term trading range.

The nearest important resistance level remains at 4,540, market by the recent local highs and the next resistance level is also 4,600. On the other hand, the support level is now at 4,500. The support level is also at 4,400-4,450. The S&P 500 continues to trade along the November-January consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract – Closer to Last Week’s High

Let’s take a look at the hourly chart of the S&P 500 futures contract. It broke above the short-term downward trend line a week ago before rallying up to around the 4,600 level. It’s trading closer to the Wednesday’s high of 4,586.

The market remains at to the resistance level of its previous local lows, but there have been no confirmed negative signals so far. So 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 continued to trade within a short-term consolidation yesterday. This morning it is expected to open much higher following global stock markets’ advance. The market will be waiting for tomorrow’s important Consumer Price Index release. We will likely see an attempt at breaking above the local highs today. The quarterly earnings season is mostly over now, and there is still an uncertainty concerning Russia-Ukraine tensions.

Here’s the breakdown:

• The S&P 500 index will likely get closer to its last week’s local high and the resistance level of 4,600.
• 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