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 went sideways on Friday despite worse-than-expected Nonfarm Payrolls release. Is this a short-term topping pattern or just a pause before another leg up?

The S&P 500 index lost 0.19% on Friday, as it remained within its Thursday’ daily trading range. The market retraced most of its late September’s decline on Thursday and the index got back to the 4,400 level again. For now, it looks like an upward correction within an over month-long downtrend. This morning the main indices are expected to open 0.1-0.4% lower.

The support level is at 4,365-4,385, marked by Thursday’s daily gap up of 4,365.57-4,383.73. On the other hand, the resistance level is at 4,430-4,450. The S&P 500 broke above its month-long downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Dow Jones Trades Along Its Downward Trend Line

Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index also broke above its short-term consolidation on Thursday. However, it remained below a month-long downward trend line. The nearest important resistance level is at 35,000, as we can see on the daily chart:

Apple Fluctuates Above $142 Price Level

Apple stock weighs around 6.1% in the S&P 500 index, so it is important for the whole broad stock market picture. The stock broke above $142 price level on Thursday but for now it looks like a correction within a downtrend or a consolidation following the September’s decline. The resistance level is at $144, marked by the previous local highs.

Should You Re-Enter a Short Position Now?

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market bounced back from the 4,400 level. For now, it looks like an upward correction following the recent decline or just a consolidation. 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 bounced back to the 4,400 level on Thursday. On Friday it fluctuated within a relatively narrow daily trading range despite the monthly jobs data release. For now it looks like an upward correction following the late September’s declines.

The risk/reward perspective seems less favorable right now and no positions are currently justified.

Here’s the breakdown:

• The S&P 500 broke above its consolidation last week, but for now it looks like an upward correction within an over month-long downtrend.
• Our speculative short position has been closed on the previous Friday at a much lower level.
• We are still expecting 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): 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