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 extended its short-term uptrend again on Monday. Will it get back to its early Sep. record high soon?

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The S&P 500 index gained 0.34% on Monday following a lower opening of the trading session. The broad stock market’ s gauge extended its recent advance and it was the highest since mid-September, as it broke above the previous local highs of around 4,465. The quarterly corporate earnings releases are positive for the market and they are only starting to gain traction. Today we will get the NFLX earnings release, tomorrow TSLA and on Thursday INTC, among others. So is this a new uptrend or still just an upward correction within an over month-long downtrend? The market seems short-term overbought here. However, there have been no confirmed negative signals so far.

The support level is at 4,440-4,450, marked by the Friday’s daily gap up of 4,439.73-4,447.69. The next support level is at 4,400-4,420. On the other hand, the resistance level is at 4,485-4,500, marked by the previous local highs. The S&P 500 extends its advance after breaking above a month-long downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

Futures Contract Gets Closer to the Record High

Let’s take a look at the hourly chart of the S&P 500 futures contract. The market broke above its downward trend line and it broke above its previous local high of around 4,470. The nearest important resistance level is now at around 4,520-4,550, marked by the early September topping pattern. 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 extended its uptrend yesterday but it got close to the resistance level of 4,485-4,500. The market seems overbought in the short term. However, the coming quarterly corporate earnings releases (today it’s NFLX, TSLA on Wednesday, and INTC on Thursday, among others) are supporting buyers here. Today the market is expected to open 0.3-0.4% higher, but we may see an intraday consolidation or a downward correction.

The risk/reward perspective seems less favorable right now and no positions are currently justified.

Here’s the breakdown:

• The S&P 500 extended its short-term uptrend on Monday again, as it got closer to the 4,500 level.
• We are waiting for a more favorable risk/reward situation and will probably enter a new speculative short position in the near term.

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