Stocks extended their rally yesterday, as the S&P 500 index broke above the 4,500 level. Is this still just an upward correction?
The S&P 500 index gained 1.89% on Monday, as it extended its gains from Friday and broke above the 4,500 level. It retraced more of its recent declines after breaking above last week’s consolidation along the 4,300-4,400 level. On last Monday’s low of 4,222.62, the market was 596 points, or 12.4%, below the Jan. 4 record high of 4,818.62. And yesterday it reached the new high of 4,516.89. It still looks like an upward correction within a downtrend, however. The market may be also trading within a new uptrend.
The consolidation along the 4,800 level in late December to early January was a topping pattern, and the index retraced all of its record-breaking advance seen in December. On Friday, it broke above a steep short-term downward trend line.
The nearest important resistance level is now at 4,500-4,550, marked by the previous local lows. The resistance level is also at 4,600. On the other hand, the support level is at 4,400-4,450, marked by the recent resistance level. The S&P 500 is now back above its early December local low, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
Apple Rallies Again
Recently, Apple (NASDAQ:AAPL) stock fluctuated along the support level of $155.0-$157.5 following the mid-January downtrend ahead of its quarterly earnings release. The stock reversed the downtrend after breaking above a short-term consolidation and since the earnings release it gained more than 10%. The resistance level is at around $180-$183, marked by the Jan. 4 record high of $182.94.
Conclusion
The S&P 500 index extended its advance yesterday and it broke slightly above the 4,500 level. It still looks like an upward correction following mid-January declines and a rebound within a new medium-term downtrend.
Stocks may further extend their uptrend, but there’s a risk of a short-term downward reversal. Today, we may see some uncertainty and a consolidation along the 4,500 level. The market will be waiting for the quarterly earnings releases (Advanced Micro Devices Inc (NASDAQ:AMD), Alphabet (NASDAQ:GOOGL) today after the session’s close, Meta (NASDAQ:FB) tomorrow and Amazon (NASDAQ:AMZN) on Thursday, among others) and the monthly jobs data announcement on Friday. There is also uncertainty concerning Russia-Ukraine tensions.
Here’s the breakdown:
- The S&P 500 broke above the 4,500 level again; it still looks like an upward correction.
- We decided to close our speculative long position from last Tuesday (4,335 level) at the opening of today’s cash market’s trading session – a gain of around 175 index points. In our opinion, no positions are currently justified from the risk/reward point of view.