S&P 500 Hit New Yearly Low, But It Still Doesn’t Look Bearish

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Stocks extended their downtrend yesterday, but they rebounded and closed positive. So was it an upward reversal? Or, just another upward correction?

The index gained 0.57% on Monday after falling to the daily low of 4,062.51. It was the lowest since last year’s May. The market reacted to the quarterly earnings, poor economic data releases, Fed’s monetary policy tightening plans and the conflict in Ukraine. Stocks reversed their intraday decline and it may look like a more permanent reversal. However, there have been no confirmed positive signals so far. The S&P 500 index this morning is gaining, and we may see a consolidation ahead of tomorrow’s important Fed’s interest rate decision release.

The nearest important resistance level is now at around 4,200-4,250. On the other hand, the support level is at 4,050-4.100, marked by the local low. The S&P 500 index extended its four-month-long downtrend, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):

S&P 500 Daily Chart.

Futures Contract – Consolidation Following Bounce

Let’s take a look at the hourly chart of the contract. Yesterday, it fell below the 4,100 level, but it quickly retraced the decline. This morning, it is trading within a consolidation along the 4,150 level.

On Thursday before the opening of the cash market we decided to open a speculative long position. We are still expecting an upward correction from the current levels.

S&P 500 E-Mini Futures Hourly Chart.

(Chart by courtesy of http://tradingview.com)

Conclusion

The S&P 500 index may see a consolidation following yesterday’s rebound. There’s a lot of uncertainty concerning tomorrow’s Fed’s release. The panic seen last Friday and yesterday may suggest that at least a short-term bottom may be in sight.

Here’s the breakdown:

  • The S&P 500 index extended its downtrend yesterday, but it closed higher.
  • We are still expecting an upward correction from the current levels.