Stocks were volatile yesterday, and the broad stock market fell by another 1%. Was it a final decline or just another leg within a downtrend? The S&P 500 index lost 1.01% on Tuesday, Feb. 22, as it extended its last week’s Thursday’s-Friday’s sell-off. The daily low was at 4,267.11, and the market closed slightly above the 4,300 mark. We’ve seen a lot of volatility following U.S. President Biden’s speech on the Russia-Ukraine conflict. This morning the S&P 500 index is expected to open 0.7% higher. We may see more volatility; however, it looks like a short-term bottoming pattern.
The nearest important resistance level is at 4,350-4,400, marked by the recent local low and some previous support levels. On the other hand, the support level is at 4,250-4,300, among others. The S&P 500 index trades within its late January consolidation, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
Futures Contract – Short-Term Consolidation
Let’s take a look at the hourly chart of the S&P 500 Futures contract. It extended the downtrend on Monday, but it managed to stay slightly above its late January local lows. For now, it looks like a short-term consolidation. It may be a bottoming pattern before an upward correction.
Yesterday, we decided to open a speculative long position before the opening of the cash market. We are expecting an upward correction from the current levels (chart by courtesy of http://tradingview.com):
Conclusion
The S&P 500 index went below the 4,300 level yesterday, as investors reacted to the ongoing Russia-Ukraine crisis news. The market may be trading within a short-term consolidation and we may see an attempt at reversing the downtrend.
Here’s the breakdown:
- The S&P 500 index will likely bounce or fluctuate following its late last week’s sell-off
- We are maintaining our yesterday’s long position.
- We are expecting an upward correction from the current levels.