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 extended their uptrend on Friday, as the S&P 500 index touched the 3,900 level. This morning we’ll likely see a retracement, but will the uptrend reverse?

The S&P 500 index gained 2.46% on Friday, as it broke above a three-day-long consolidation following the recent advances. It extended an uptrend from the October 13 new medium-term low of 3,491.58. The market got close to the resistance level of 3,900 and we’ll likely see downward correction or a consolidation here. The S&P 500 index is expected to open 0.5% lower. Investors will now wait for the important Wednesday’s FOMC Monetary Policy release and Friday’s monthly jobs data.

The S&P 500 index continues to trade above the upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Remains Close to 3,900

Let’s take a look at the hourly chart of the S&P 500 futures contract. It’s trading slightly below the 3,900 level this morning. The resistance level is at 3,900-3,950, and the nearest important support level is at around 3,840-3,850.

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 will open slightly lower this morning, as investors will be taking short-term profits off the table following Friday’s rally of 2.5%. There’s a growing uncertainty ahead of the Wednesday’s FOMC release, and we may see downward correction or a consolidation.

Here’s the breakdown:

• Stocks will retrace some of their Friday’s rally this morning; The S&P 500 remains below the 3,900 level.
• In our opinion, the short-term outlook is neutral.

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