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 a stop-loss level of 4,550 and 4,200 as a price target.
The S&P 500 index broke above 4,400 level again. Will it get back to its early September record high? Or was it just a short-term upward correction?
The S&P 500 index fell the lowest since July 20 on Monday, as it reached the local low of 4,305.91. It was 239.9 points or 5.28% below the September 2 record high of 4,545.85. Since Tuesday it has been bouncing and yesterday it reached a local high of 4,465.40.
The nearest important support level of the broad stock market index is now at 4,400-4,430, marked by the Monday’s daily gap down of 4,402.95-4,427.76. On the other hand, the nearest important resistance level is now at 4,470-4,500. The S&P 500 broke below its over four-month-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
Our Short Position
Let’s take a look at the hourly chart of the S&P 500 futures contract. We opened a short position on August 12 at the level of 4,435. The trade is profitable and we still think that a speculative short position is justified from the risk/reward perspective. (chart by courtesy of http://tradingview.com):
Conclusion
On Monday, the S&P 500 index accelerated the downtrend from the early September record high and it reached to around 4,300 price level. Since Tuesday we’ve witnessed a short-covering rally fueled by the Wednesday’s FOMC Monetary Policy release. Most likely it’s just an upward correction within a downtrend.
There have been no confirmed positive signals so far. Therefore, we think that the short position is justified from the risk/reward perspective.
Here’s the breakdown:
- The market accelerated its downtrend on Monday, as the S&P 500 index got close to 4,300 level.
- Our speculative short position is still justified from the risk/reward perspective.
- We are expecting some 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): short positions with an entry at 4,435 price level, with a stop-loss level of 4,550 and 4,200 as a price target.
Thank you.
Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care
