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Stock prices went lower again – is a short-term bottom in?

The S&P 500 index lost 0.90% on Monday, as it further extended its last week’s decline following Wednesday’s FOMC interest rate hike. On Friday the index lost 1.1% and on Thursday it sold off by 2.5%. Yesterday the broad stock market index reached its new local low of 3,800.04.

Today the S&P 500 will likely open 0.2% lower after an overnight Bank of Japan’s monetary policy release. The markets were very volatile, but the European stock indexes bounced from their local lows.

Recently the S&P 500 index broke below its two-month-long upward trend line and moved sharply lower after getting back to that line last week, as we can see on the daily chart:

Futures Contract Trades Closer to 3,800

Let’s take a look at the hourly chart of the S&P 500 futures contract. Today it reached new local low of around 3,804. The resistance level remains at 3,900-3,950. There have been no confirmed positive signals so far. However, there are some clear short-term oversold conditions that may lead to a bounce or an upward reversal at some point.

Conclusion

The S&P 500 index is expected to open slightly lower this morning and it may see an attempt at retracing some of the recent sell-off. For now, it looks like a temporary bottom before an upward correction.

Here’s the breakdown:

• The S&P 500 index went to the 3,800 level yesterday.
• Today it will likely go sideways or bounce despite an initial bearish reaction to the important Bank of Japan release.

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Sunshine Profits: Effective Investments through Diligence and Care

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Stocks sold off on Thursday, as Central Banks signaled more tightening ahead. Is this a new downtrend?

The S&P 500 index lost 2.49% on Thursday, as it extended its short-term downtrend after breaking below the 4,000 level. The market continued to react on Wednesday’s FOMC interest rate hike. Yesterday it went the lowest since November 10.

This morning the S&P 500 will likely open 1.0% lower, so it may see more downside. Stock prices will likely break below their local lows and a month-long consolidation.

Last week the index broke below its two-month-long upward trend line, as we can see on the daily chart:

Futures Contract Trades Below 3,900

Let’s take a look at the hourly chart of the S&P 500 futures contract. It is extending a decline and right now, it’s trading below the 3,900 level. The resistance level is now at 3,950-4,000.

Conclusion

The S&P 500 index will likely extend its short-term downtrend at the opening of today’s trading session. We may see an intraday correction or a rebound following the recent sell-off. However, there have been no confirmed positive signals so far. We may see an increased volatility due to an expiration of series of index and stock derivatives, known as quadruple witching.

Here’s the breakdown:

• S&P 500 index broke below its over month-long trading range.
• Stock prices may extend the downtrend, however, they may see a volatility later in the day.

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

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