Stock prices bounced back after their Wednesday’s rout, and they may see more volatility.The S&P 500 index remained above 4,700 level yesterday and retraced a large part of its Wednesday intraday sell-off. Maintaining a bullish bias is still justified, and the market may have another opportunity to reach new highs. However, it’s crucial to pay close attention to the trading action, as there could be more uncertainty and volatility ahead. Nevertheless, I believe it is still justified to maintain the profitable long position.The broad stock market index gained 1.03% on Thursday, fueled by lower-than-expected Final GDP number release and a weakening U.S. dollar, among other factors. On Wednesday the S&P 500 reached new local high of 4,778.01 before quickly going down to 4,700 level. Recently it was extending the uptrend after last week’s release of the FOMC Statement, which marked a pivot in the Fed’s monetary policy. In early December the S&P 500 broke above the late July local high of around 4,607 after resuming a rally from the local low of 4,103.78 on October 27.Stocks are expected to open 0.2% higher this morning following slightly lower-than-expected release of the Core PCE Price Index (one of the closely watched inflation gauges), so the S&P 500 will remain close to the 4,750 level. Yesterday I wrote that “the likely scenario is a consolidation along 4,700-4800”, and it appears the prediction was accurate. How can we capitalize on such trading action? It’s better to shorten the timeframe of the trades and look for buying opportunities at support levels and selling at resistance levels.
On Wednesday the S&P 500 index broke below its steep upward trend line as we can see on the daily chart:

Futures Contract Trades Above 4,800
Let’s take a look at the hourly chart of the S&P 500 futures contract. It rebounded after Wednesday’s intraday sell-off, and this morning the contract is trading slightly above the 4,800 level. The support level is at 4,750, marked by Wednesday’s daily low of around 4,745. On the other hand, the resistance level is at 4,820-4,830.

Conclusion
The long position remains profitable and recently it added even more gains. Overall the index has gained 754 points since opening that trade at 3,992.4 on Feb. 27. In the near future, I will be looking to close that trade and shift focus to a more short-term oriented trading strategy. For now, it remains justified as stocks may further extend their uptrend.The S&P 500 index bounced back after its intraday sell-off on Wednesday, and this morning, it is likely to move sideways. Yesterday I wrote that “in a short-term, the market may see some more uncertainty and volatility”, and indeed, there is a lot of uncertainty following an early-month rally and the recent breakout of the S&P 500 above the 4,700 level. Nevertheless, there is still a chance of extending the uptrend, as there have been no confirmed negative signals.Here’s the breakdown:

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