sp 500 daily outlook fri 26 feb 2016 second phase of countertrend rally is likely to have started 17

(Click to enlarge charts)

What happened yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has a clear break above the 1947 range top (short-term pivotal resistance) and invalidated our preferred scenario for a second round of the downleg on the pull-back/consolidation that started from 23 February 2016 high.

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

 Key elements

• The Index has a bullish breakout from the former swing high areas of 13 January, 01 February and 22 February 2015 that capped the Index at 1947/54 zone.
• The daily (medium-term) RSI oscillator is still oriented to the upside and still has room for further manoeuvre before reaching its extreme overbought level. These observations suggest that upside momentum of yesterday’s bullish breakout remains intact.
• The recent pull-back from the 1946 high seen on 23 February 2016 high stopped at the 1890 level which is closed to our first medium-term downside target of 1900. Click here for a recap.
• The next significant resistance stands at 1994 which is defined by the former swing low of 14 December 2015 that has seen the price action reacted off this level thrice in the past (28 August 2015, 16 September 2015 & 14 October 2015) and the 61.8% Fibonacci retracement of the steep decline from 01 December 2015 high to the 11 February 2016 low of 1807.
• On the shorter-term, the Index has started to evolve within a bullish ascending channel from 24 February 2016 low with its lower boundary (support) now at 1939/30.

Key levels (1 to 3 days)

Pivot (key support): 1939/30

Resistances: 1974 & 1994

Next support: 1890

Conclusion

Current technical elements have now turned the upper hand back to the bull camp. The expected pull-back/consolidation is likely to have ended shallower than expected (only hitting our first downside target at 1900) where the Index may have started to undergo the second phase of its countertrend rally, wave (b) in terms of the Elliot Wave Principal.

As long as the 1939/30 short-term pivotal support holds, the Index is likely to see a further upside movement to target the resistances of 1974 before 1994.

On the flipside, a break below 1930 may negate the bullish tone to see a slide back to retest Wednesday, 24 February low of 1890.

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