Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with an entry at 4,435 price level, with 4,520 as a stop-loss and 4,200 as a price target.
Stocks retraced their opening decline yesterday, as they gained 0.1% at the close. Does it mean a correction is over? Or was it just a dead cat bounce?
The S&P 500 index closed above the 4,400 mark yesterday following a bounce from the daily local low of 4,367.73. For now, it looks like a correction within a downtrend. However, a bounce from the three-month-long upward trend line may be considered bullish. The nearest important support level remains at 4,350-4,370. On the other hand, the resistance level is now at 4,420-4,430, marked by some late July local highs, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
S&P 500 Breaking Below Medium-Term Trend Line?
The S&P 500 index broke below its medium-term upward trend line. However, it is still relatively close to it. The nearest important support level is at 4,300, as we can see on the weekly chart:
Dow Jones Below 35,000 Again
Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index has broken to new record highs, but it failed to stay above the 35,250 price level. Then it broke below 35,000. The blue-chip is trading along May-June local highs again, as we can see on the daily chart:
Apple’s Failed Run
Apple stock got back below the $150 price level. The breakout below $150 was a negative signal, and the stock fell to the local low of $144.50. Yesterday it bounced from its two-month-long upward trend line. Overall, it looks like a medium-term consolidation and most likely a topping pattern.
Profitable short position
Let’s take a look at the hourly chart of the S&P 500 futures contract. We opened our short position on Thursday, August 12 at the level of 4,435. The position is profitable, but we will wait for more downside movement, as there have been no confirmed short-term positive signals so far. If the market extends the short-term decline, we will move the stop-loss level lower (chart by courtesy of http://tradingview.com):
Conclusion
The S&P 500 index retraced its intraday decline yesterday, and it got back slightly above the 4,400 level. The market is expected to decline this morning, and we may see some short-term fluctuations south of the 4,400 resistance level.
Here’s the breakdown:
- The market trades within a consolidation following recent declines.
- Our last week’s speculative short position remains profitable.
- We are expecting a 5% or bigger correction from Monday’s high.
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 4,435 price level, with 4,520 as a stop-loss and 4,200 as a price target.
Thank you.
Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care
