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 extended their short-term consolidation yesterday – is this a topping pattern or just a relatively flat correction before another leg up?
The S&P 500 index lost 0.30% on Thursday, Dec. 30 after reaching another new all-time high of 4,808.93. The market is fluctuating following the recent record-breaking rally. The S&P 500 index is now way above the local highs from November and December. Stocks broke above the consolidation and we had a Santa Claus rally. The broad stock market’s gauge is trading within a short-term consolidation this week. For now, it looks like a 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 this year’s advances.
The nearest important resistance level remains at around 4,800-4,810. On the other hand, the support level is at 4,740-4,750, marked by the previous highs. 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 Got Closer to the Previous Local Highs
Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the new record high after breaking above the resistance level of around 4,740. Yesterday the market got closer to the broken resistance level, and it acts as a level of support now. 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 likely to extend its short-term consolidation on the last trading day of the year. It is expected to open 0.1% lower this morning. We may see some more fluctuations following the recent rally. There have been no confirmed negative signals so far.
Here’s the breakdown:
- The S&P 500 will likely extend a short-term consolidation; we may see a downward correction at some point.
- 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