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 rallied 5.54% on Thursday following lower-than-expected consumer inflation number release. So is the bear market over? Or is it just another short-lived rally?
The S&P 500 index gained 5.54% on Thursday as it retraced its Wednesday’s decline of 2.1%. Then it broke above the 3,900 level. Investors reacted to the pre-market CPI release - it was lower than expected at +7.7% y/y. The broad stock market’s gauge went the highest since mid-September after retracing the recent sell-off. It got closer to the psychological resistance level of 4,000.
This morning the S&P 500 index is expected to open 0.2% higher. We may see some intraday profit-taking action later in the day. However, after a huge yesterday’s rally, downward reversal is not likely.
Futures Contract Bounced from 4,000
Let’s take a look at the hourly chart of the S&P 500 futures contract. It rallied up to the 4,000 level this morning. It’s the nearest important resistance level. On the other hand, the support level is now at 3,900-3,930, marked by the previous local highs.
In our opinion, no positions are currently justified from the risk/reward point of view. (chart by courtesy of http://tradingview.com):
Conclusion
Stock prices will likely extend their yesterday’s rally this morning. However, we may see some profit-taking action later in the day, as the market seems overbought in the short-term. There have been no confirmed negative signals so far.
Here’s the breakdown:
- The S&P 500 rallied on lower consumer inflation release.
- There may be some uncertainty as the index gets closer to the 4,000 level.
- In our opinion, the short-term outlook is neutral.
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
