sp 500 daily outlook tues 15 apr 2016 turn neutral watch the 2110 and 2087 levels 1807052016

(Click to enlarge charts)

What happened yesterday/earlier

The U.S. SP 500 Index (proxy for the S&P 500 futures) has continued its relentless rally and broke above the 2083/81 medium-tem pivotal resistance and invalidated our preferred bearish scenario.

Even though, momentum indicators have flashed bearish divergence signals and volume is lesser than the average volume of the past five days but bulls have refused to give up. Therefore, we got to respect the price action as the market is now driven more by  momentum rather than fundamentals. Any significant decline in price action got to be triggered by a break of support levels or else the Index is likely to continue to churn higher.

Key elements

• The current rally from 11 February 2016 low of 1807 has seen a gain of 16% for the Index, which is not far away from the last rally of 15% from 24 August 2015 low to 03 November 2015 high seen within the “Expanding Wedge” configuration that is in place since its all-time high of 2138 printed in 17 May 2015.
• Current price action is now testing the upper boundary (resistance) of the “Expanding Wedge” at 2100 with the daily (medium-term) RSI oscillator that is continuing to show a bearish divergence signal (see daily chart)
• On the shorter-term, the Index is evolving within a bullish ascending channel in place since 12 April 2016 low @6am. Current price action is now approaching the upper boundary of the channel at 2110 which also coincides closely with the 0.764 Fibonacci projection of the up move from 08 April 2016 low@2am to 15 April 2016 high @1am projected from yesterday low of 2065.
• The above mentioned Fibonacci projection is used to derive a potential 5^th wave target based on the Elliot Wave Principal. In this instance, after a five waves impulsive movement from 08 April 2016 low with the potential 5^th wave target (0.764 projection) that has coincided closely with a graphical resistance of 2100/2110 (upper boundary of the Expanding Wedge + upper boundary of the short-term ascending channel), this a potential risk zone (2100/2110) where the on-going rally may see a top and start to pull-back.
• The first near-term supports stands at 2087 which is last Friday, 15 April 2016 former minor swing high follow by yesterday swing low area of 2065 that also coincides closely with the earlier congestion area of the descending range from 07 April to 11 April 2016.

Key levels

Supports: 2087 & 2065

Resistances: 2100/110, 2120 & 2138

Conclusion

Even though, we have elements from fractal analysis, graphical and momentum studies that indicate a potential exhaustion but in order to be prudent we need to see a break of supports before we are more confident that a pull-back/decline has started.

Only a break below 2084 is likely to trigger a short-term pull-back towards 2065 and on the other hand, a clearance above 2110 may see an extension of the relentless rally towards 2120 and even the 52-week/current all-time high at 2138.

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