S&P 500 Reached New Yearly Low, But It Still Doesn’t Look Bearish

Stocks extended their downtrend yesterday, but they rebounded and closed positive. So was it an upward reversal or just another upward correction?

The S&P 500 index gained 0.57% on Monday after falling to the daily low of 4,062.51. It was the lowest since last year’s May. The market reacted to the quarterly earnings, poor economic data releases, Fed’s monetary policy tightening plans, and the Ukraine conflict. Stocks reversed their intraday decline and it may look like a more permanent reversal. However, there have been no confirmed positive signals so far. This morning the S&P 500 index is expected to open 0.2% higher and we may see a consolidation ahead of tomorrow’s important Fed interest rate decision release.

The nearest important resistance level is now at around 4,200-4,250. On the other hand, the support level is at 4,050-4.100, marked by the local low. The S&P 500 index extended its four-month-long downtrend, as we can see on the daily chart (chart courtesy of http://stockcharts.com):

(Click on image to enlarge)

Futures Contract – Consolidation Following Bounce

Let’s take a look at the hourly chart of the S&P 500 futures contract. Yesterday it fell below the 4,100 level, but it quickly retraced the decline. This morning it is trading within a consolidation along with the 4,150 level.

On Thursday before the opening of the cash market, we decided to open a speculative long position. We are still expecting an upward correction from the current levels. (our Stock Trading Alert includes details of our trading positions along with the stop-loss and profit target levels). (chart by courtesy of http://tradingview.com):

(Click on image to enlarge)

Conclusion

The S&P 500 index will likely open 0.2% higher today and we may see a consolidation following yesterday’s rebound. There’s a lot of uncertainty concerning tomorrow’s Fed release. Friday’s and yesterday’s panic may suggest that at least a short-term bottom may be in sight.

Here’s the breakdown:

• The S&P 500 index extended its downtrend yesterday, but it closed higher.
• We are still expecting an upward correction from the current levels.