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 fluctuated on Monday, as investors took short-term profits off the table following the recent rally. Is this a topping pattern or just a consolidation?

The S&P 500 index lost 0.28% on Monday, after gaining 1.4% on Friday, as it fluctuated above the 4,100 level. Last week it extended an over month-long uptrend from the medium-term low of 3,636.87 (June 17), despite the ongoing worries about inflation, tightening Fed’s monetary policy, and Russia-Ukraine conflict. This morning the S&P 500 is expected to open 0.7% lower and we may see some further profit-taking action following last week’s rally.

Futures Contract Trades Below the 4,100 Level

Let’s take a look at the hourly chart of the S&P 500 futures contract. It is slightly below the 4,100 level this morning. For now, it looks like a consolidation after last week’s breakout above the 4,000 level. The resistance level is at 4,150-4,200, among others.

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 0.7% lower following global stock markets’ weakness. For now, it looks like a short-term downward correction of the recent advances. There have been no confirmed negative signals so far.

Here’s the breakdown:

• The S&P 500 will likely retrace some more of its last week’s rally; for now, it looks like a correction.
• 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