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.

Stocks extended their downtrend on Friday after mixed jobs data release. They will likely continue lower today. Is a short-term bottom in sight?

The S&P 500 index lost 0.41% on Friday, Jan. 7, as it slightly extended its recent decline. The market fluctuated below the 4,700 level following the monthly jobs data release - Nonfarm Payrolls number was lower than expected, but the Unemployment Rate was also lower than expected. The index reached the new local low of 4,662.74 and it was more than 150 points below its last Tuesday’s record high of 4,818.62. The recent consolidation along the 4,800 level was a topping pattern. And the market got back to its November-December trading range.

On Dec. 3 the index fell to the local low of 4,495.12 and it was 5.24% below the previous record high. So it was a pretty mild downward correction or just a consolidation following last year’s advances.

The nearest important resistance level remains at 4,700-4,720, and the next resistance level is at around 4,750. On the other hand, the support level is at 4,650, marked by some previous local highs. The S&P 500 remains close to the November’s-December’s consolidation local highs, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Extends the Decline

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the new record high on Tuesday a week ago before reversing the upward course and getting back below the support level of 4,740 on Wednesday. The market retraced more than a half of its late December rally. 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% lower today. The market will likely continue its downtrend and it will remain below the 4,700 level. We may see some short-term fluctuations following a lower opening of the trading session and possibly an intraday upward correction.

Here’s the breakdown:

• The S&P 500 remains within a short-term downtrend, as it continues retracing its late December rally.
• In our opinion no positions are currently justified from the risk/reward point of view.

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