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The S&P 500 went sideways following last week’s decline – is a correction over?

The broad stock market index gained 0.24% on Monday as it continued to trade along the 4,400 level. Last week on Thursday the market retraced its rally and it closed the previous Friday’s daily gap up. Earlier it retraced all of its mid-June declines following economic data releases, among other factors. On Friday, June 30 the index reached a new medium-term high of 4,458.48.

There is still a lot of uncertainty concerning monetary policy, and some technology stocks’ valuation concerns, but the investors’ sentiment remains bullish.

Stocks are expected to open 0.3% higher this morning so the S&P 500 will likely remain above the 4,400 level. The market extends its sideways trading action as we can see on the daily chart:

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Futures Contract Trades Above 4,450

Let’s take a look at the hourly chart of the S&P 500 futures contract. Recently it rallied up to the 4,500 level again and on Thursday it retraced some of that rally. The nearest important support level remains at 4,400-4,420 and the resistance level is at 4,480-4,500.

(Click on image to enlarge)

Conclusion

The S&P 500 index is expected to open slightly higher this morning. There have been no confirmed negative signals so far. For now, it looks like a relatively flat correction within an uptrend. However, the market may see a more pronounced profit taking action at some point. Investors will be waiting for the important Consumer Price Index release tomorrow.

Here’s the breakdown:

• The S&P 500 continues to trade above the 4,400 level.
• There have been no confirmed negative signals, however, a downward correction may be on the cards.
• In my opinion, the short-term outlook is bullish.

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