S&P 500 sold off again - Is this still just a correction?

Stock prices suffered another sharp decline yesterday – is this a change of trend?

The S&P 500 index lost 1.44% on Tuesday, as the broad stock market continued its Monday’s 1.8% sell-off. It reacted to Monday’s better-than-expected ISM Services PMI release. On Thursday the S&P 500 reached new local high of 4,100.51, and on yesterday it went closer to the 3,900 level.

This morning the S&P 500 is expected to open 0.3% lower after an overnight decline of more than 1%. We may see a short-term rebound following the recent declines. It still looks like a consolidation within an uptrend. However, the index broke below its two-month-long upward trend line yesterday, as we can see on the daily chart:

Futures contract goes sideways

Let’s take a look at the hourly chart of the S&P 500 futures contract. It broke below the slight upward trend line. The support level is at around 3,900.

Conclusion

The S&P 500 index extended its Monday’s decline yesterday on ongoing recession and inflation worries. The market retraced its recent advances, but we may see a short-term or intraday upward correction at some point. Investors will be waiting for Friday’s PPI release, the next week’s Tuesday’s CPI release and Wednesday’s FOMC release.

Here’s the breakdown:

• S&P 500 index broke below the 4,000 level and extended its Monday’s decline yesterday.

• We may see a rebound today, but the market reversed its short-term uptrend.

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