sp 500 daily outlook fri 11 mar 2016 potential final push up towards key 202030 before decline 18014

(Click to enlarge charts)

What happened yesterday/earlier

In our previous short-term daily outlook/strategy published yesterday (click here for a recap), we have highlighted that the U.S. SP 500 Index (proxy for the S&P 500 futures) is in the midst of shaping its final potential upleg above the 1970/63 pivotal support.

Yesterday’s price action has managed to drift up and hit the short-term expected upside target at 2009 (last Friday’s 04 March 2016 high) reinforced by the European Central Bank (ECB) latest monetary easing measures (printed a high of 2011). Thereafter, it recorded a swift sell-off of 2.1% to hit a low of 1968 after ECB’s press conference.

Key elements

• After hitting a low of 1968 which is also our medium-term pivotal support at 1970/63 as per highlighted in our weekly outlook/strategy (click here to recap), the Index has managed to trade high and reintegrated back above the lower boundary of the bearish “Ascending Wedge”.
• The key significant resistance zone stands at 2020/30 which is defined by trendline resistance from 02 December 2015 high and a Fibonacci cluster (see daily chart).
• The upper boundary (resistance) of the bearish “Ascending Wedge” now stands at 2040 which also coincides with the 0.618 Fibonacci projection of  the rally from 24 February 2016 low of 1890 to 04 Mar 2016 high of 2009 projected from yesterday low of 1968, a typical 5^th wave (end target) based on the Elliot Wave Principal. Therefore, the 2040 is the “excess” level above the key significant resistance zone of 2020/30.
• The daily RSI oscillator is coming close to its overbought level which suggests limited upside potential in price action at this juncture.

Key levels (1 to 3 days)

 Intermediate resistance: 2020/30

Pivot (key resistance): 2040

Support: 1970

Next resistance: 2081

Conclusion

The Index is now coming close to the key medium-term risk zone of 2020/30 where it may shaped a final push up towards it with a maximum limit set at the excess (pivotal resistance) of 2040 before the start of potential medium-term downside movement to retest the 1970 support in the first step.

On the other hand, a clearance above the 2040 pivotal resistance is likely to see an extension of the countertrend rally cycle to target the next resistance at 2081 (the descending trendline that has capped the lower highs since the current all-time high of 2138 printed in May 2015).

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