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.

Stock prices extended their downtrend on Friday, as they reached new long-term lows. Today we’ll likely see a bounce at the open; is this a reversal?

The S&P 500 index lost 1.51% on Friday after its Thursday’s sell-off of 2.1%, as it further extended a medium-term downtrend. It was the lowest since November of 2020. Friday’s daily low was at 3,584.13 – 13% below its September 12 local high of 4,119.28. There’s still a lot of fear concerning Central Banks’ tightening monetary policies, Russia-Ukraine war and an energy crisis.

This morning the S&P 500 is expected to open 0.8% higher. So we will likely see a bounce or a consolidation following the recent sell-off.

Futures Contract Bounces From Below 3,600

Let’s take a look at the hourly chart of the S&P 500 futures contract. It went to new long-term lows overnight, but right now it’s trading closer to the previous local lows. The resistance level remains at around 3,700-3,750.

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 is expected to open 0.8% higher this morning. For now, it looks like a consolidation within a downtrend. However, there are some clear oversold conditions that may lead to a more meaningful upward correction.

Here’s the breakdown:

• The S&P 500 has further extended its downtrend on Friday; this morning we’ll likely see an upward correction.
• 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