sp 500 declined but still holding above 216055 support 1824252016

Daily Outlook, Tues 02 August 2016

(Click to enlarge charts)

What happened earlier/yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has started to slip lower in today’s European session (02 August) from yesterday high of 2183) and printed a current intraday low of 2163 (translated into a decline of 0.9%  from the high of 2183).

This decline came in line with the JGB 10 year yields that has spiked up to -0.06% ( 4^th consecutive day of rallies from 27 July 2016 low of -0.291 and renewed JPY’s strength that saw the USD/JPY breached below last Friday’s low of 101.94 (current it is testing the lower limit of the medium-term support of 101.50).

In addition, the Japanese cabinet has approved 4.6 trillion yen in extra spending for the current fiscal which is just a fraction (16%) of the total 28 trillon yen stimulus package announced last week by PM Abe.

Today’s key U.S. economic data releases/events will be as follow:

• Core Personal Consumption Expenditure for Jun @1230 GMT (0.1% m/m & 1.6% y/y consensus)
• Personal Income for Jun @1230 GMT (0.3% m/m consensus)

Key elements

• The Index has slipped back into the 2 weeks plus of range consolidation in place since 14 July 2016 high after yesterday’s intraday breakout above is upper boundary. This is not a positive sign but the Index is still holding above the lower boundary of the range now at 2160.
• Right below the 2160 range support is this week medium-term pivotal support of 2155 which is defined by a confluence of elements (click here for the details as per highlighted in our latest weekly technical outlook/strategy published yesterday).
• The daily (medium-term) RSI is now right at its pull-back support (depicted in dotted green) with the shorter-term  (1 hour) Stochastic oscillator has dipped into its oversold region. These observations suggest that a potential turnaround in price action to the upside is likely to occur at this juncture.
• The near-term resistance stands at 2183 (yesterday’s high) follow by 2194 next (Fibonacci projection cluster).

Key levels (1 to 3 days)

Intermediate support: 2160

Pivot (key support): 2155 (medium-term)

Resistances: 2183 & 2194

Next supports: 2120

Conclusion

The Index is still holding above the 2160/2155 support but it needs to break out fast above 2183 to reignite the bullish tone for a potential rally to target the next resistance at 2194 in the first step.

However, failure to hold above 2155 medium-term pivotal support is likely to invalidate the preferred bullish scenario to see a deeper decline towards the upper limit of the pull-back zone of 2120 that was the former range top that capped all previous advances since May 2015 high.

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