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 rallied following yesterday’s FOMC release. The Uncertainty seems gone and the index is expected to open higher.

The broad stock market index gained 1.63% on Wednesday, as it reacted to the FOMC Monetary Policy release. It retraced its Monday’s-Tuesday’s decline and closed above the 4,700 level again. On the previous Friday the index fell to the local low of 4,495.12 and it was 5.24% below the Nov. 22 record high of 4,743.83. Then we saw another attempt at getting back to the all-time high and on Friday the index closed the highest in history.

Today, the index is expected to open 0.5% higher and we may see an attempt at reaching the new record high. However, an intraday profit taking action is likely later in the day.

The nearest important resistance level is now at 4,740-4,750, marked by the record high. On the other hand, the support level is at 4,660-4,670 and the next support level is at 4,600-4,610, marked by the recent local lows. The S&P 500 is at its previous local highs, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

The Short Position Was Closed at the Stop-Loss Level

Let’s take a look at the hourly chart of the S&P 500 futures contract. It broke above the downward trend line last week and it rallied up to its previous local highs. On Monday the market reversed its upward course and it retraced some of the advance. Then it rallied following yesterday’s Fed release.

Our short position was closed at the stop-loss level of 4,720. It was opened on November 23. Overall, we lost 42 points on that trade. 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 likely extend its yesterday’s advance at the cash market open today. However, there are some short-term technical overbought conditions and we may see another downward correction. So the index may continue to fluctuate along the 4,700 level.

Here’s the breakdown:

• The S&P 500 is expected to extend its yesterday’s rally, however we may see a profit-taking action later in the day.
• Our short position was closed at the stop-loss level of 4,720.

As always, we’ll keep you, our subscribers, well-informed.

There will be no Stock Trading Alert tomorrow, December 17. We apologize for inconvenience.

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