Stocks broke above their consolidation yesterday. Is this an upward reversal or just another upward correction? The NFP release leaves question marks.
In his book, The Dhandho Investor: The Low–Risk Value Method to High Returns, Mohnish Pabrai coined an investment approach known as "Heads I win; Tails I don't lose much." Q3 2021 hedge fund letters, conferences and more The principle behind this approach was relatively simple. Pabrai explained that he was only looking for securities with Read More
The S&P 500 index gained 0.83% on Thursday following breaking above the recent local highs and the 4,400 price level. The market retraced most of its late September’s decline yesterday as investors awaited today’s monthly jobs data release, among other factors. The Nonfarm Payrolls release has been worse than expected at +194,000. However, the main indices are expected to open 0.1-0.5% higher this morning.
The support level is now at 4,365-4,385, marked by yesterday’s daily gap up of 4,365.57-4,383.73. On the other hand, the resistance level is at 4,430-4,450. The S&P 500 broke above its month-long downward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
S&P 500 Remains Above Medium-Term Support Level
The S&P 500 index is trading below its almost year-long upward trend line. The nearest important medium-term support level remains at 4,200-4,300, as we can see on the weekly chart:
Dow Jones Got Back To Its Downward Trend Line
Let’s take a look at the Dow Jones Industrial Average chart. The blue-chip index also broke above its short-term consolidation yesterday. However, it remained below a month-long downward trend line. The nearest important resistance level is at 35,000, as we can see on the daily chart:
Apple Is Back Above $142 Price Level Again
Apple Inc (NASDAQ:AAPL) stock weighs around 6.1% in the S&P 500 index, so it is important for the whole broad stock market picture. The stock broke above $142 price level yesterday but for now it looks like a correction within a downtrend or a consolidation following the September’s decline. The resistance level is now at $144, marked by the previous local highs.
The S&P 500 index has been trading within a short-term consolidation since last Thursday. Yesterday the index broke above that consolidation and it got back above the 4,400 level. For now it looks like an upward correction following the late September’s declines.
The risk/reward perspective seems less favorable right now and no positions are currently justified.
Here’s the breakdown:
- The S&P 500 broke above its week-long consolidation, but bulls are not out of the woods yet, as the worse-than-expected jobs data release may lead to some more uncertainty.
- Our speculative short position has been closed last Friday at a much lower level.
- We are still expecting more downward pressure and a correction to 4,200-4,250 level.
Like what you’ve read? Subscribe for our daily newsletter today, and you'll get 7 days of FREE access to our premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care
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.