sp 500 daily outlook thurs 28 apr 2016 bearish tone remains intact watch the next supports at 2065 a

(Click to enlarge charts)

What happened yesterday/earlier

The U.S. SP 500 Index (proxy for the S&P 500 futures) has started to shape a push up after the release of the Fed’s widely expected in the no interest rate hike. In the press statement, the Federal Open Market Committee omitted the previous language that “global economic and financial developments continue to pose risk” and instead Fed officials mentioned it will “closely monitor” the external environment. This implies that the Fed’s view on the state of global financial markets has improved after the rout seen at the start of 2016 and increase the probability of a rate hike in the June meeting.

The U.S. SP 500 Index has managed to stage a push up in yesterday’s late U.S. session and tested the 2100 predefined short-term pivotal resistance but it did not break above it.  In today’s Asian session, it has reversed down sharply from 2100 as expected and hit our first target (support) at 2077.

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

Key elements

• The current sell-off on the U.S. SP 500 Index is being reinforced by today’s no change stance in Bank of Japan’s monetary policy where market participants are  expecting some stimulus as an increase of bonds/ETFs purchase or an implementation of  a negative interest rate loan programme to banks to spur lending to consumers and corporations and fight off the recent strength of the JPY. The USD/JPY plummeted from 111.88 to 108.77 (300 +pips) within one hour after the policy announcement and sparked across the board sell-off in risk assets (equities).
• The U.S. SP 500 Index has finally succumb to the bearish pressure (we have highlighted the risks of a bearish reaction earlier since last Friday, click here for a recap) after lagging behind the U.S Tech 100 (proxy for the Nasdaq 100 futures) which has broken below its 22 April 2016 former minor swing low of 4438 first on 27 April 2016. The next short-term support rests at 2065 for the U.S. SP 500 Indexwhich is defined by the minor swing low area of 18 April 2016 that also coincides closely with the earlier congestion area (the pink boxes) of the former descending range from 07 April to 11 April 2016.
• Based on the Elliot Wave Principal and fractal analysis, the Index is likely to be undergoing a bearish impulsive wave structure of a minor degree (a minimum 5 wave movement) from the 2111 high printed on 21 April 2016. Right now, it is in the motion of undergoing the potential downward wave iii with a potential target at 2044 derived from the 1.1618 Fibonacci projection (see 1 hour chart).
• Interestingly, the 2044 expected wave iii target also confluences closely the 2036 level which is defined by the graphical swing low areas of 8/12 April 2016 and the 23.6% Fibonacci retracement of the whole up move from 11 February 2016 low to last week high of 2111 (see daily chart).
• The hourly (short-term) Stochastic oscillator is coming close to an extreme oversold level which suggests the Index may shape a minor rebound soon.

Key levels (1 to 3 days)

Intermediate resistance: 2083

Pivot (key resistance): 2100

Supports: 2065 & 2044/2036

Next resistances: 2110 (weekly pivot)

Conclusion

Maintain bearish bias. The Index may now see a further decline towards the 2065 support before a potential minor rebound occurs towards the short-term intermediate resistance at 2083. Thereafter, another downleg may occur to target the next resistance at 2044/2036.

On the flipside, a break above 2100 pivotal resistance is likely to dampen the bearish expectation to see an upward choppy price action to retest the significant medium-term swing high of 2110 (weekly pivotal resistance).

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