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 reached new record high yesterday but it closed slightly lower and below the 4,800 level. Will the uptrend continue today?

The broad stock market index extended its consolidation along the 4,800 level yesterday. It reached the new all-time high of 4,818.62, but it failed to remain above the 4,800 mark and it closed 0.06% lower. So was it a short-term topping pattern or just another quick correction within an uptrend? On Monday the index fell to the local low of 4,758.17. The S&P 500 index remains way above the local highs from November and December. Stocks broke above the consolidation and we had a quick Santa Claus rally. The broad stock market’s gauge continues to trade within a short-term consolidation. For now, it looks like a relatively flat correction within an uptrend.

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 last year’s advances.

The nearest important resistance level remains at around 4,800-4,820. On the other hand, the support level is at 4,740-4,750, marked by the previous highs. Recently 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 – Further Consolidation

Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the new record high yesterday in the morning and it broke above the last week’s local highs. However, the market has quickly retraced that advance. 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 0.1% lower today despite much better than expected ADP Non-Farm Employment Change release. We may see some more uncertainty and market’s fluctuations along the 4,800 level. There have been no confirmed negative signals so far.

Here’s the breakdown:

• The S&P 500 will likely continue to fluctuate within a short-term consolidation along the 4,800 level.
• 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