Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with an entry at 4,540 price level, with a stop-loss level of 4,680 and 4,400 as an initial price target.
Stocks extended their long-term uptrend once again following yesterday’s FOMC release. Will the S&P 500 index reach 4,700 level?
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The S&P 500 index gained 0.65% on Wednesday, Nov. 3, as it extended its advance once again. The broad stock market index reached the new record high of 4,663.46 yesterday. The rally is still not broad-based and it’s driven by a handful of tech stocks like MSFT, NVDA, TSLA. The market seems overbought in the short-term and most likely it’s still trading within a topping pattern and not a breakout pattern.
The nearest important support level is at 4,600-4,630 and the next support level is at 4,550-4,570. On the other hand, a potential resistance level is now at 4,700. The S&P 500 trades above a steep short-term upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
Is a Short Position Still Justified?
Let’s take a look at the hourly chart of the S&P 500 futures contract. On Friday the market broke above the resistance level of around 4,600. Since the previous Friday, the price has been trading above a short-term upward trend line. But this week it accelerated the advance.
The market seems overbought and poised for a correction. Therefore, we still think that a speculative short position is justified from the risk/reward perspective. However, the price is getting close to our stop-loss level and soon we may close the position with a loss. (chart by courtesy of http://tradingview.com):
Conclusion
The broad stock market reached the new record high yesterday. It still looks like a topping pattern and we may see a consolidation or a downward correction at some point. There may be a profit-taking action following quarterly earnings releases. Today the main indices are expected to open virtually flat again.
Here’s the breakdown:
- The S&P 500 reached yet another new record high on Wednesday, as it got closer to the 4,700 level.
- A speculative short position is still justified from the risk/reward perspective.
- We are expecting a 3% or higher correction from the new record highs.
As always, we’ll keep you, our subscribers, well-informed.
Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with an entry at 4,540 price level, with a stop-loss level of 4,680 and 4,400 as an initial price target.
Thank you.
Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care
