By Paul Rejczak. Originally published at ValueWalk.
Stock prices fluctuate following their last week’s rally. Is this just a pause before another leg up or a short-term topping pattern?
The S&P 500 index lost 0.75% on Wednesday, as it retraced its Friday’s advance after bouncing from the local high of around 4,150. On Tuesday the broad stock market went sideways following long holiday weekend, as investors took short-term profits off the table. On May 20 it went to the medium-term low of 3,810.32 and it was 1,008.3 points or 20.9% below the Jan. 4 record high of 4,818.62. So technically, the broad stock market entered a bear market territory. There’s still a lot of uncertainty and worries about inflation data, tightening Fed’s monetary policy and the Russia-Ukraine conflict. Today, the S&P 500 is expected to open 0.4% higher, so we may see more short-term fluctuations.
Q1 2022 hedge fund letters, conferences and more
The nearest important resistance level is now at around 4,150-4,200, marked by the previous consolidation and the recent local highs. On the other hand, the support level is at around 4,050-4,100. The S&P 500 index broke above its downward trend line recently, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
Futures Contract – Just a Downward Correction?
Let’s take a look at the hourly chart of the S&P 500 futures contract. It reached the 4,200 level on Monday, before retracing more than 100 points from the short-term local high. For now, it looks like a correction within an uptrend. (chart by courtesy of http://tradingview.com):
Conclusion
We will likely see a higher opening of the S&P 500 index this morning. The broad stock market may extend its short-term consolidation. For now, it looks like a flat correction following last week’s rally. Investors will be waiting for tomorrow’s monthly jobs data release and June 15 FOMC’s interest rate decision. This morning we’ve seen worse than expected ADP Non-Farm Employment Change release.
Here’s the breakdown:
- The S&P 500 index will likely extend its short-term consolidation this morning
- The resistance level remains at around 4,150.
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Thank you.
Paul Rejczak,
Stock Trading Strategist
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The information above represents analyses and opinions of Paul Rejczak & Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. At the time of writing, we base our opinions and analyses on facts and data sourced from respective essays and their authors. Although formed on top of careful research and reputably accurate sources, Paul Rejczak and his associates cannot guarantee the reported data’s accuracy and thoroughness. The opinions published above neither recommend nor offer any securities transaction. Mr. Rejczak is not a Registered Securities Advisor. By reading his reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees, affiliates as well as their family members may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.
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