S&P 500 – Just a pause before another step?


Stock prices are fluctuating after their rally last week. Is it just a pause before another step or a short term head pattern?

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The S&P 500 index lost 0.75% on Wednesday, reversing its advance on Friday after rebounding from the local high of around 4,150. The broad stock market swerved on Tuesday after a long holiday weekend, investors who removed short-term profits from the table. On May 20, it hit the medium-term low of 3,810.32 and was 1,008.3 points or 20.9% below the January 4 high of 4,818.62. So technically, the broader stock market has entered bear market territory. There are still a lot of uncertainties and worries about the inflation data, the Fed’s monetary policy tightening and the Russian-Ukrainian conflict. Today, the S&P 500 is expected to open 0.4% higher, so we may see more near-term swings.

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The nearest important resistance level now sits around 4,150-4,200 marked by previous consolidation and recent local highs. On the other hand, the support level is around 4050-4100. The S&P 500 index broke above its downtrend line recently as we can see from the daily chart (graphic courtesy of http://stockcharts.com):

S&P500

Futures contract – Just a downward correction?

Let’s take a look at the hourly chart of the S&P 500 futures contract. It hit the 4,200 level on Monday, before pulling back more than 100 points from the local short-term high. For now, it looks like a correction in an uptrend. (graphic courtesy of http://tradingview.com):

S&P500

Conclusion

We will likely see a higher opening of the S&P 500 this morning. The broader stock market could extend its consolidation in the near term. For now, it looks like a flat correction after last week’s rally. Investors will be waiting for tomorrow’s monthly jobs data release and the June 15 FOMC interest rate decision. This morning we saw the ADP Non-Farm Payrolls release worse than expected.

Here is the breakdown:

  • The S&P 500 will likely extend its near-term consolidation this morning
  • The resistance level remains around 4,150.

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Thanks.

Paul Rejczak,

Equity Trading Strategist

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The information above represents the analyzes and opinions of Paul Rejczak & Sunshine Profits associates only. As such, it may prove to be erroneous and be subject to change without notice. At the time of writing, we base our opinions and analyzes on facts and data from the respective trials and their authors. Although formed on the basis of careful research and sources believed to be accurate, Paul Rejczak and his associates cannot guarantee the accuracy and completeness of the data reported. The notices published above do not recommend or offer any corporate action. Mr. Rejczak is not a registered securities adviser. By reading his reports, you fully agree that he will not be held responsible for any decisions you make regarding the information provided in these reports. Investing, trading and speculating in all financial markets can involve a high risk of loss. Paul Rejczak, Sunshine Profits employees, affiliates and their family members may go short or long in securities, including those mentioned in any of the reports or essays, and may make purchases and/or or additional sales of these titles without noticing.

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