sp 500 217668 is the support to watch for a new potential upleg 1827112016

Daily Outlook, Thursday 18 August 2016

(Click to enlarge charts)

What happened earlier/yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has broken below the2180 short-term pivotal support before the release of the U.S. Federal Reserve (Fed) minutes for the July FOMC meeting.

Right after the release of the Fed minutes, the S&P 500 has rallied strongly and recorded a close of 2182 at the end of the U.S. session. Details of the latest Fed minutes revealed that Fed officials had a split view on the health of the U.S. economy which indicated that the Fed is likely to go slow on the pace of its current policy interest rate hiking (normalisation) cycle. These observations suggest that the liquidity conditions in the financial markets remain “loose” which tends to benefit stocks.

Technically, we have viewed yesterday’s decline as a whipsaw and the short-term uptrend in place since 03 August 2016 low of 2147 remains intact for the Index (refer to the details as per highlighted below).

Please click on this link for a recap on our previous daily short-term technical outlook/strategy.

Key elements

• The daily (medium-term) RSI oscillator remains positive above its support and 50% level which indicate that upside momentum of price action remains intact.
• The decline in price action of 1.1% from Monday, 15 August high of 2194 has managed to stall at the 2168 pull-back support of the former minor congestion range top of 04 August/05 August 2016 which also confluences closely with the 50% Fibonacci retracement of the up move from 03 August 2016 low to Monday, 15 August 2016 high of 2194.
• The rebound in price action seen in yesterday’s mid U.S. session has managed to surpass a former short-term descending trendline now turns pull-back support (depicted in light green) at 2176.
• The significant short-term resistance zone remains at 2200 /2209 which is defined by a Fibonacci projection cluster.

Key levels (1 to 3 days)

Intermediate support: 2176

Pivot (key support): 2168

Resistances: 2200 & 2209

Next support: 2155 (medium-term)

Conclusion

Maintain bullish bias and consider yesterday’s price action as a potential whipsaw. The Index may see a minor pull-back first to retest the 2176 intermediate pull-back support before another potential upleg materialises to target the next resistance at 2200 in the first step.

On the other hand, failure to hold above the 2168 daily short-term pivotal support is likely to invalidate the preferred recovery view for a further decline towards the medium-term pivotal support of 2155.

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