Stocks Go Sideways – Is It Still Bullish?
Stock prices fluctuated on Tuesday, but they closed flat. Will they break higher?
The S&P 500 index lost 0.03% on Tuesday following as-expected consumer inflation release. However, the market extended its advance from its Friday’s local low of 4,060.79, as yesterday’s daily high was at 4,159.77. Last week on Wednesday and on Thursday stocks were declining on stronger U.S. dollar, global markets’ sentiment. The S&P 500 retraced some of its January rally after bouncing down from 4,200 resistance level. On February 2 the S&P 500 reached new medium-term high of 4,195.44 and last Friday it fell to the mentioned low. Earlier the broad stock market’s gauge was extending its bounce from the January 19 local low of 3,885.54.
Today, the S&P 500 index is expected to open 0.3% lower after another important economic data release – Retail Sales along with the Empire State Manufacturing Index. Both numbers were better than expected. This morning we’ll likely see more uncertainty and consolidation following January advances. The S&P 500 broke below the upward trend line last week, as we can see on the daily chart:
Futures Contract Continues Sideways
Let’s take a look at the hourly chart of the S&P 500 futures contract. On Tuesday it bounced up to the 4,180 level following the CPI number release, but since then it has been fluctuating along the 4,150 level. The nearest important resistance level remains at 4,180-4,200.
Stocks will likely extend their short-term consolidation this morning. It still looks like a relatively flat correction within an uptrend. However, the S&P 500 remains below the important medium-term resistance level of 4,200.
Here’s the breakdown:
- The S&P 500 will likely extend its consolidation today.
- Stock prices continue to fluctuate following January advances.
- In my opinion, the short-term outlook is neutral.
Stock Trading Strategist