The S&P 500 index extended its Friday decline yesterday, but it remained within a week-long volatile consolidation. Is this a medium-term bottoming pattern?

The broad stock market index lost 0.74% on Monday, Mar. 14, after its Friday’s decline of 1.3%. The market bounced from the short-term resistance level of 4,300 and it extended a volatile consolidation following the early March sell-off from the 4,400 level. Last week on Tuesday it reached the local low of 4,157.87 and then we’ve seen a rebound to the 4,300 level. Yesterday the S&P 500 came back below the 4,200 level again.

The market is closer to the Feb. 24 local low of 4,114.65. It was 704 points or 14.6% below the January 4 record high of 4,818.62 then. There’s still a lot of uncertainty concerning the ongoing Ukraine conflict. This morning the S&P 500 index is expected to open 0.5% higher following the lower than expected Producer Price Index release. The market will be waiting for the important tomorrow’s FOMC Statement release, and we may see some further consolidation.

The nearest important resistance level is now at around 4,200. On the other hand, the support level is at 4,100-4,150. The S&P 500 index continues to trade slightly above the recently broken downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

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Futures Contract Trades Along with the Previous Lows

Let’s take a look at the hourly chart of the S&P 500 futures contract. Today it is bouncing from the 4,140 level. It’s a support level marked by the previous local low. The support level is also at 4,100.

We are still maintaining our long position, as we are expecting an upward correction from the current levels (chart by courtesy of http://tradingview.com):

(Click on image to enlarge)

Conclusion

The S&P 500 index will likely bounce this morning following better-than-expected producers’ inflation data release. The market may extend its volatile consolidation and we may see more uncertainty, as investors will be waiting for Wednesday’s FOMC Statement release.

Here’s the breakdown:

• The S&P 500 index will likely bounce this morning, but we may see some more short-term uncertainty.
• We are maintaining our long position (opened on Feb. 22).
• We are still expecting an upward correction from the current levels.