The S&P 500 reached a new medium-term high, but a correction may be coming.

The S&P 500 index gained 0.45% on Monday as it further extended its last week’s advances. The daily high was at 4,749.52 yesterday, and the index was the highest since January 2022. Last week on Wednesday and Thursday the market rallied after the FOMC Statement release and on Friday investors were taking some profits off the table.

On Wednesday the Fed basically announced a pivot in its monetary policy – stocks, bond prices, precious metals rallied, and the U.S. dollar sold off. Recently the S&P 500 broke above its late July local high of around 4,607. It resumed the rally from the October 27 local low of 4,103.78.

Stocks will likely open 0.2% higher this morning. The S&P 500 index is close to a medium-term high, so it may slightly extend its uptrend as we can see on the daily chart:

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Futures Contract Trades Above 4,800

Let’s take a look at the hourly chart of the S&P 500 futures contract. It’s trading slightly above 4,800 level ahead of the index open. The nearest important support level is now at 4,760-4,780, among others.

Apple Is Relatively Weaker

Let’s move on to an individual stock. Apple is one of the most important market movers. Yesterday I wrote that it “looks like a topping pattern or just some flat correction following the rally”, and indeed, the market retraced some of its recent rally before bouncing from the upward trend line. The $200 price level remains an important resistance level here.

(Click on image to enlarge)

Conclusion

The S&P 500 will likely extend its uptrend this morning, however, it may only reach a few points above yesterday’s daily high. On Thursday and Friday there was a profit taking action and uncertainty following the recent rally, and yesterday the market reached new medium-term high.

There have been no confirmed negative signals so far, but the market may see a downward correction at some point. The long position is still profitable and yesterday it added even more gains. It’s been a long since opening that trade (on Feb. 27), and in the near future I will be looking to close that trade and focus on a more short-term oriented trading strategy.

Here’s the breakdown:

• The S&P 500 trades at new medium-term high, but there’s more uncertainty amid a possible profit-taking action.
• There may be a downward correction at some point.
• In my opinion, the short-term outlook is still bullish.

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