sp 500 daily outlook thurs 07 jan 2016 further potential downside below 19601980 1792182016

(Click to enlarge charts)

What happened earlier

The U.S. SP 500 Index (proxy for the S&P 500) has plummeted and broke below the 1994 key medium-term support. Our preferred medium-term recovery scenario has been put on hold for now (please click on this link to recap our weekly outlook/strategy).

Key elements

• The Index has broken down below the 1994 pull-back support of the “Double Bottom” bullish breakout during the Asian session. Given the current price action, the Index is now evolving in a ‘Symmetrical Triangle” range configuration in place since 17 May 2015 high.
• The long-term bullish trend in place since March 2009 remains intact with the next key support at 1890/1880. This support is defined by the lower boundary of the long-term ascending channel and a Fibonacci cluster (see weekly chart).
• Short-term bearish dynamic remains intact for the Index as it continues to trade at the lower end of the a descending channel with the lower boundary (support) at 1930 that confluences with the 1.00 Fibonacci projection of the down move from 30 December 2015 high to 05 January 2015 low @12am projected from 06 January 2015 high @3am.
• The hourly Stochastic oscillator has dipped into its extreme oversold level which highlights the risk of a short-term rebound in price action.

Key levels (1 to 3 days)

Intermediate resistance: 1960

Pivot (key resistance): 1980

Support: 1930 & 1890/1880

Next resistance: 1994

Conclusion

Short-term technical elements are still in favour for the bears. Any potential rebound is likely to be capped by the intermediate resistance at 1960 with a maximum limit set at the 1980 daily (short-term) pivotal resistance for another drop to target 1930 in the first instance (lower boundary of the descending channel).

However, a break above the 1980 pivotal resistance may halt the bearish tone to see a push up to test the former support linking the swing low area of 15 December 2015 and 05 January 2015 now turns resistance at 1994.

Disclaimer

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