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 rallied to new record high yesterday and it got close to the 4,800 level. Will the uptrend continue? Or is this a blow-off top?

The broad stock market index gained 1.38% on Monday, as it reached the new record high of 4,791.49. Stocks extended their rally after gaining 0.6% on Thursday. This morning the S&P 500 index is expected to open 0.3% higher again. We will most likely see an attempt at breaking above the 4,800 level. 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 this year’s advances.

The nearest important resistance level is at around 4,800. On the other hand, the support level is now at 4,740-4,750, marked by the previous highs. The S&P 500 broke above its two-month long consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract – Breakout Above the Consolidation

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the new record high yesterday after breaking above the resistance level of around 4,740. 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 will most likely reach another new record high this morning, following yesterday’s rally and a breakout above the previous high. There have been no confirmed negative signals so far. However, there are some short-term overbought conditions.

Here’s the breakdown:

• The S&P 500 will likely reach the new record high this morning, but later we may see an intraday profit taking action.
• 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