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.

The S&P 500 index extended the short-term decline on Tuesday. It is poised to rebound this morning, but will it reverse the downtrend?

The S&P 500 index lost 1.84% yesterday, as it broke slightly below its Jan. 10 local low of 4,582.24. Investors reacted to worse-than-expected economic data releases, quarterly earnings and Russia-Ukraine tensions. The broad stock market’s gauge continues to trade within an over two-month long consolidation. Late December – early January consolidation along the 4,800 level was a topping pattern and the index fell to the previous trading range. This morning the market is expected to open 0.5% higher and it will likely get back above the 4,600 level.

The nearest important resistance level is at around 4,630, marked by the yesterday’s daily high. On the other hand, the support level is at 4,550-4,570, marked by the previous local lows. The S&P 500 is still trading within a medium-term consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Went Closer to Previous Lows

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market fell below its recent local low yesterday, but today it is getting back to the 4,600 level. We may see some more short-term uncertainty. 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 0.5% higher this morning and to retrace some of its yesterday’s decline. There have been no confirmed positive signals so far. However, we may see an attempt at bouncing from the mentioned support levels. The quarterly earnings releases remain a bullish factor for stocks.

Here’s the breakdown:

• The S&P 500 went closer to its December local lows again, as investors reacted to economic data, Russia-Ukraine tensions.
• 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