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 extended its last week’s decline yesterday. But the market will likely rebound this morning. So is the correction over?

For in-depth technical analysis of various stocks and a recap of today's Stock Trading Alert we encourage you to watch today's video.

The S&P 500 index lost 1.14% on Monday, as it extended the decline from its last Thursday’s local high of 4,732. Yesterday it fell to the local low of 4,531.10. So it retraced over 200 points since Thursday. Investors were selling off stocks following Wednesday’s FOMC Monetary Policy release. On Dec. 3 the index fell to the local low of 4,495.12 and it was 5.24% below the Nov. 22 record high of 4,743.83. Then we saw another attempt at getting back to the all-time high and more than a week ago on Friday the index closed the highest in history.

Today the broad stock market is expected to open 0.9% higher and we may see some retracement within a short-term downtrend. For now, it looks like an upward correction.

The nearest important resistance level is now at around 4,590-4,600, marked by the yesterday’s daily gap up of 4,587.90-4,600.22. The resistance level is also at 4,620-4,630. On the other hand, the support level is at 4,500-4,550, marked by the early December local lows. The S&P 500 continues to trade within an two-month-long consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Trades Along the 4,600 Level

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the new record high on Thursday, Dec. 16, before reversing its uptrend and getting back to the early Dec. lows. For now, it looks like a further consolidation and the market keeps extending its sideways trading action. 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 higher this morning and it will retrace some of the recent 200-point decline. We will likely see an intraday consolidation and the market may fluctuate along the 4,600 level.

Here’s the breakdown:

• The S&P 500 broke below the 4,600 level on Monday, as it extended its last week’s decline.
• The market remains within a two-month-long consolidation.
• 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