sp 500 daily outlook fri 23 oct deeper pull back scenario invalidated minor pull back before new pot

(Click to enlarge charts)

What happened yesterday

The U.S. SP 500 Index (proxy for the S&P 500 has broken the 2028 short-term pivotal resistance and had a daily close above the 2050/2060 risk zone.

Yesterday’s positive price action with the aid of a dovish press conference from the European central bank, ECB has invalidated our preferred “deeper pull-back” scenario for the medium-term.

Please click on this link for a recap on our previous daily outlook.

Key elements

• Price action has broken above the 2050/2060 risk zone (see daily chart) which is also coincides closely with a former short-term range top from 09 October 2015 high (in dotted green, see hourly chart) now turns pull-back support at 2040.
• The hourly (short-term) Stochastic oscillator still has some room left for further downside before reaching its extreme oversold level. This observation suggests the risk of a minor pull-back after yesterday’s steep rally.
• The upper limit (resistance) of the ascending channel (in orange) in place since 29 September 2015 low stands at 2083 which also confluences with multiple Fibonacci projections from various degrees.

Key levels (1 to weeks)

Pivot (key support): 2040

Resistance: 2083

Next support: 2014 

Conclusion

From a medium-term (1 to 3 weeks) perspective, yesterday’s price action has put the “deeper pull-back” scenario on hold and based on the Elliot Wave Principal, the Index is likely in the midst of the bullish wave 3/ within a 5 wave bullish impulsive structure in place since the “Black Monday”, 24 August 2015 low.

On the shorter-term (1 to 3 days), the Index may see a minor pull-back holding above the 2040 pivotal support before another potential rally occurs to target the next resistance at 2083.

On the flipside, failure to hold above the daily (short-term) pivotal support at 2040 may damage the bullish tone to see a further slide towards the 2014 neckline support area of the “Double Bottom” bullish breakout.

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