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.
Stocks are trading within their yesterday’s daily range this morning. Is the downward correction over?
The S&P 500 index lost 0.82% yesterday, as it broke below its short-term consolidation along the 4,700 level. The market reacted to higher than expected producer Price Index release. Wednesday’s daily low fell at the 4,630.86 level, so a downward correction from the record high of 4,718.50 reached almost 88 points or 1.9%. The recent rally was not broad-based and it was driven by a handful of tech stocks like MSFT, NVDA, TSLA. The market seemed overbought in the short-term and traded within a topping pattern. Today the index is retracing some of the recent decline, as it is gaining 0.3%.
The nearest important support level is at 4,630-4,650 and the next support level is at 4,600. On the other hand, the resistance level is at 4,700-4,720. The S&P 500 broke below its steep short-term upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
Futures Contract Is Also Below the Trend Line
Let’s take a look at the hourly chart of the S&P 500 futures contract. The market broke below a week-long upward trend line yesterday. The resistance level remains at 4,680-4,700. In our opinion no positions are currently justified from the risk/reward point of view. (chart by courtesy of http://tradingview.com):
Conclusion
The broad stock market retraced some of its recent record-breaking rally yesterday. For now it looks like a short-term downward correction. The main indices are mixed between -0.2% and +0.5% this morning and it looks like a consolidation following the decline. The market may go sideways today, as investors keep taking short-term profits off the table.
Here’s the breakdown:
- The S&P 500 extended its uptrend last week, but since last Friday it is trading within a downward correction.
- Still no positions are 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
