sp 500 potential short term setback below 2121 1820262016

Daily Outlook, Thurs 07 July 2016

(Click to enlarge charts)

What happened earlier/yesterday

Since hitting a high of 2108 on Monday, 04 July 2016, the U.S. SP 500 Index (proxy for the S&P 500 futures) has failed to make any breakthrough above the 2100/2121 predefined intermediate resistance and tumbled by 1.66% to hit a low of 2073 seen in yesterday early U.S. session, 06 July 2016.

Despite the renewed Italian banking crisis that will have a negative domino effect across the EU financial system that has caused havoc in both the major Asian and European stock indices yesterday. However, the U.S. market remains the strongest as it fell the least versus the rest of the majors and staged a rally throughout the later part of yesterday’s U.S. session to print a high of 2101 which almost recovered entire decline from Monday, 04 July 2016 high (a gap of 0.33%).

Please click here to recap our latest weekly technical outlook/strategy published on Monday, 04 July 2016.

Today key U.S. economic releases:

• ADP Nonfarm Employment Change for June @1215GMT (159K estimates)

Key elements

• The Index has now started to shows signs of short-term exhaustion after its current rally of 1.5% from yesterday U.S. session low of 2073 to today’s European session current intraday high of 2105.
• Yesterday’s rally has taken the Index right back on its range top resistance in place since  17 May 2015 high now at 2100/121 which also confluences closely with the 76.4% Fibonacci retracement of the recent decline from Mon, 04 Jul high to yesterday low of 2073.
• The hourly Stochastic oscillator has traced out a bearish divergence signal at its overbought region which suggests that upside momentum of yesterday’s rally has stated to wane and the Index now faces the risk of at least a short-term pull-back in price action.
• The next significant support to watch will be at 2066 which confluences with multiple elements (the former minor swing high area of 24 June 2016 that has been tested by the recent minor swing low of 30 June 2016 and a Fibonacci cluster).

Key levels (1 to 3 days)

Pivot (key resistance): 2121

Supports: 2085& 2066

Next resistance: 2138

Conclusion

Risk of a short-term setback. As long as the 2121 short-term pivotal resistance is not surpassed, the Index now faces a potential setback to test the 2085 intermediate support follow by the more significant short-term support at 2066 before another potential upleg occurs.

However, a clearance above the 2121 short-term pivotal resistance is likely to see the continuation of the up move for a retest at the current all-time high of 2138 in the first step.

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