sp 500 daily outlook fri 18 mar 2016 challenging the 204046 risk zone 1802602016

(Click to enlarge charts)

What happened yesterday/earlier

The U.S. SP 500 Index (proxy for the S&P 500 futures) had a volatile session as it had declined initially in the European session to 2015 before it reversed up to challenge the upper limit of the risk zone a 2040 in the U.S. session(printed a high of 2046).

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

Key elements

• Yesterday’s price action has pushed up towards the upper boundary of the bearish “Ascending Wedge” at 2046 which is slightly above the upper limit of the risk zone at 2040.
• The 4 hour Stochastic oscillator remains overbought and now has flashed a bearish divergence signal which suggests that the current upside momentum in price action is waning.
• Yesterday’s push up in price action has only lead the S&P 500 to make a new high where else the Nasdaq 100 (NDX) & Russel 2000 (RUT) do not have any new highs. Therefore, given such desynchronised movement seen in the major indices, the risk of a multi-week decline is still intact at this juncture for the S&P 500 as it is likely at the tail end of the countertrend rally cycle that started from the 11 February 2016 low of 1807.
• The first support to watch now will be at 2020 which is the lower boundary of the “Ascending Wedge” follow by 2004 (the minor swing lows area of 15 March and 16 March 2016).

Key levels (1 to 3 days)

Pivot (key resistance): 2040/46

Support: 2020 & 2004

Next resistance: 2081

Conclusion

We are maintaining our bearish bias for the Index to see the start of a potential multi-week decline. 2046 will be the pivotal resistance now and the Index needs to break below the 2020 first support to gain impetus for a potential slide to target the next support at 2004 in the first step.

On the other hand, a break above the 2046 pivotal resistance is likely to invalidate the expected bearish scenario to open up scope for an extension of the countertrend rally towards the next resistance at 2081 (the descending trendline that has linked the lower lows of the impending “Double Top” since the current all-time high of 2138 printed in May 2015).

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