Stock prices fluctuate following their last week’s rally. Is this just a pause before another leg up or a short-term topping pattern?
The S&P 500 index lost 0.75% on Wednesday, as it retraced its Friday’s advance after bouncing from the local high of around 4,150. On Tuesday the broad stock market went sideways following long holiday weekend, as investors took short-term profits off the table. On May 20 it went to the medium-term low of 3,810.32 and it was 1,008.3 points or 20.9% below the Jan. 4 record high of 4,818.62. So technically, the broad stock market entered a bear market territory. There’s still a lot of uncertainty and worries about inflation data, tightening Fed’s monetary policy and the Russia- Ukraine conflict. Today, the S&P 500 is expected to open 0.4% higher, so we may see more short-term fluctuations.
The nearest important resistance level is now at around 4,150-4,200, marked by the previous consolidation and the recent local highs. On the other hand, the support level is at around 4,050-4,100. The S&P 500 index broke above its downward trend line recently, as we can see on the daily chart.
Futures Contract – Just a Downward Correction?
Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the 4,200 level on Monday, before retracing more than 100 points from the short-term local high. For now, it looks like a correction within an uptrend.
Conclusion
We will likely see a higher opening of the S&P 500 index this morning. The broad stock market may extend its short-term consolidation. For now, it looks like a flat correction following last week’s rally. Investors will be waiting for tomorrow’s monthly jobs data release and June 15 FOMC’s interest rate decision. This morning we’ve seen worse than expected ADP Non-Farm Employment Change release.
Here’s the breakdown:
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The S&P 500 index will likely extend its short-term consolidation this morning
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The resistance level remains at around 4,150.
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All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' employees and associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
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