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.

Stock prices slightly extended their downtrend yesterday on strengthening U.S. dollar, global stock markets’ declines. Is the S&P 500 forming a short-term bottom?

The S&P 500 index lost 0.41% on Tuesday, as it continued to fluctuate following the recent sell-off. It fell to the new medium-term low of 3,886.75, before closing above the 3,900 level. Stocks further extended their decline following the previous Friday’s sell-off in a reaction to the Fed Chair Powell’s speech.

In the first half of August the S&P 500 was extending its two-month-long uptrend from the medium-term low of 3,636.87 (June 17) despite ongoing worries about inflation, tightening Fed’s monetary policy, Russia-Ukraine conflict. On August 16 it reached the local high of 4,325.28.

Today the S&P 500 index is expected to open 0.2% lower. We will likely see some more short-term uncertainty and a consolidation along the 3,900 level.

Futures Contract Trades Close to 3,900

Let’s take a look at the hourly chart of the S&P 500 futures contract. It retraced its recent rebound on Friday and since then it has been fluctuating along the 3,900 level. The support level is at around 3,850-3,900.

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 open slightly lower this morning. We may see some more short-term uncertainty, as investors will be waiting for tomorrow’s ECB Rate Decision release and a speech form the Fed Chair Powell. For now, it looks like a flat correction within a downtrend and there have been no confirmed positive signals so far.

Here’s the breakdown:

• The S&P 500 trades within a short-term consolidation; for now, it looks like a pause within a downtrend.
• 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