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 is about to break above its short-term consolidation this morning. So is this an upward reversal or just another upward correction?

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The broad stock market index gained 0.41% yesterday after bouncing from the 4,300 level again (daily low fell at 4,290.49). This morning the market is likely to break above its recent consolidation as the main indices are expected to open % higher. Yesterday’s ADP Non-Farm Employment Change release has been better than expected at +568,000 and it was bullish for the market. Investors will be waiting for tomorrow’s Nonfarm Payrolls number release.

The support level remains at 4,290-4,300. The support level is also at around 4,350. On the other hand, the resistance level is at 4,400, marked by the recent local highs. The S&P 500 continues to trade below its month-long downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Should You Re-Enter a Short Position Now?

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market is trading within a short-term uptrend, so it seems that closing our short position on Friday was the right decision. For now, it looks like an upward correction following the recent decline. 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 has been trading within a short-term consolidation since last Thursday. Today it will most likely break above that trading range, but we may see some short-term uncertainty as the market gets to the 4,400 resistance level.

There have been no confirmed positive signals so far. However, the risk/reward perspective seems less favorable right now and no positions are currently justified.

Here’s the breakdown:

• The S&P 500 will most likely break above its week-long consolidation. For now it looks like an upward correction following the recent decline.
• Our speculative short position has been closed last Friday.
• However, we are still expecting more downward pressure and a correction to 4,200-4,250 level.

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