Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,678 price level, with 4,720 as a stop-loss and 4,350 as a price target.

Stocks extended their short-term downtrend yesterday, as the S&P 500 index got closer to the 4,500 level. Will the downtrend continue?

The S&P 500 index lost 1.18% on Wednesday after another higher opening of the trading session. The market went lower following testimonies from the Fed Chair Powell and the Treasury Secretary Yellen again. The index fell the lowest since the October 19 and it went below its early September local high of around 4,546. Overall, it lost 4.92% from the Nov. 22 record high of 4,743.83. Today it is expected to open 0.6% higher again, so we will see some more short-term volatility.

The nearest important support level is now at 4,450-4,500. On the other hand, the resistance level is at 4,560-4,580, marked by the recent local lows. The S&P 500 retraced more of its October-November advance, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Short Position Remains Profitable, New Stop-Loss and Profit Target Levels

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market trades within a short-term downtrend after breaking below the upward trend line in late November. It looked like a topping pattern following an advance from the early October lows.

We still think that a speculative short position (opened on Tuesday, Nov. 23 - 4,678 price level) is justified from the risk/reward perspective. We decided to move the stop-loss level from 4,820 to 4,720 and the profit target level from 4,450 to 4,350. (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index extended its downtrend yesterday following another attempt at reversing higher. Today it is expected to open 0.4% higher, but we will most likely see more short-term volatility. There have been no confirmed positive signals so far.

Here’s the breakdown:

• The S&P 500 extended its short-term downtrend yesterday and it got closer to the 4,500 level.
• A speculative short position is still justified from the risk/reward perspective.
• We are expecting more than a 5% correction.

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 entry at 4,678 price level, with 4,720 as a stop-loss and 4,350 as a price target.

Thank you.

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