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 retraced some of its recent decline on Friday. Was it a reversal’s confirmation or just an upward correction before another leg down?

The S&P 500 index gained 2.39% on Friday, as it broke above the 4,000 level again. On Thursday the broad stock market index fell to the new medium-term low of 3,858.87. It was 959.8 points or 19.9% below the Jan. 4 record high of 4,818.62. So, the market bounced from a psychological 20% correction mark. Recently stocks continued to decline following fears of inflation, tightening monetary policy and the Russia-Ukraine war. This morning the S&P 500 index is expected to open 0.1% lower. We may see a consolidation or short-term correction following Friday’s rally.

Futures Contract Broke Above its Downward Trend Line

Let’s take a look at the hourly chart of the S&P 500 futures contract. It broke above its short-term downward trend line. The nearest important support level is at around 3,980-4,000.

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 index is expected to open 0.1% lower this morning, as investors will likely take some profits off the table following Friday’s rally. For now, it looks like a correction within a short-term uptrend. The markets will be waiting for tomorrow’s Retail Sales release and a speech from the Fed Chair Powell.

Here’s the breakdown:

• The S&P 500 index retraced some of its recent declines on Friday; for now it looks like an upward correction, but it may also be a more sustained advance.
• 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