Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,678 price level, with 4,820 as a stop-loss and 4,450 as a price target.

The S&P 500 reached the new record yesterday, but it closed 0.3% lower. Was it a reversal or just a quick downward correction before another leg up?

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The S&P 500 index reached the new all-time high of 4,743.83 yesterday following Jerome Powell’s reappointment to lead the Fed. However, the market reversed its intraday uptrend and it retraced all of the advance before closing 0.32% lower. It looked like a topping pattern, as the index got back below 4,700 level.

The nearest important support level remains at 4,630-4,650 and the next support level is at 4,600. On the other hand, the resistance level is at 4,700-4,750. The S&P 500 continues to trade along the 4,700 level, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Broke Below the Trend Line

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market reached the new record high yesterday, but then it quickly got back below the 4,700 level and it broke below the month-long upward trend line.

It looks like a topping pattern following the advance from the early October lows. Therefore, we decided to open a speculative short position this morning, before the opening of the cash market (4,678 price level). (chart by courtesy of http://tradingview.com):

Conclusion

The S&P 500 index is expected to open virtually flat this morning. The futures contract retraced some of its overnight decline, but it is still trading below the 4,700 mark. We will likely see an intraday consolidation following yesterday’s volatility. The market will be waiting for series of economic data releases tomorrow including the Core PCE Price Index, Preliminary GDP number and the FOMC Meeting Minutes.

We decided to open a speculative short position this morning (4,678 price level). We are expecting a 5% correction from the current levels.

Here’s the breakdown:

• The S&P 500 backed from the new record high yesterday and it looked like a short-term or medium-term topping pattern.
• Opening a speculative short position (4,678 price level) is justified from the risk/reward perspective.
• We are expecting a 5% correction from the current levels.

As always, we’ll keep you, our subscribers, well-informed.

Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,678 price level, with 4,820 as a stop-loss and 4,450 as a price target.

Thank you.

Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care