sp 500 at inflection zone risk of a new downleg 2690032017

Short-term Technical Outlook (Thurs, 30 Mar 2017)

(Click to enlarge charts)

What happened earlier/yesterday

The U.S. S&P 500 Index (proxy for the S&P 500 futures) had plummeted lower at the start of the week to print a low of 2321 on Monday, 27 March 2017 (just 0.25% away from the first medium-term downside target of 2315).

Thereafter, the Index has staged a cumulative 1.6% rebound in past three days as market participants cast aside the recent inability of the U.S. Congress (House) to pass a new health care plan to repeal Obamacare and turn to focus on “hopes” that tax reform (the next major agenda on Trumponomics) will be passed with lesser disagreement and rebellion among Republicans.

Interestingly, the recent up move of the Index has brought it to the 2360/65 intermediate resistance area and below the predefined 2373/76 medium-term pivotal resistance zone set for this week. Click here for a recap on our weekly technical outlook published on Sunday.

Let’s us now review the current key elements.

Key technical elements

• The current up move is now coming close to a pull-back resistance of the former ascending channel support from 04 November 2016 low at 2376 which also confluences closely with the 61.8% Fibonacci retracement of the decline from its current all-time high area of 2400 to this week current low of 2321 and the minor descending trendline resistance from 01 March 2017 current all-time high (see daily & hourly  charts).
• The shorter-term hourly RSI oscillator has just broken below a corresponding ascending trendline in relation with the price action of the index from 27 March 2017 low. In addition, prior to the bearish breakdown, the RSI has also flashed a bearish divergence signal at its overbought zone. These observations suggest that the recent upside momentum has started to abate and the Index is at risk of a bearish reversal at this juncture.
• The intermediate support to watch rests at 2352, yesterday’s minor swing low.

Key levels (1 to 3 days)

Intermediate resistance: 2360/65

Pivot (key resistance): 2373/76 (medium-term)

Supports: 2352, 2337 & 2315

Next resistance: 2400 (all-time high area)

Conclusion

The Index has now reached an inflection zone where it may start to see the start of another downleg. As long as the 2373/76 medium-term pivotal resistance is not surpassed and a break below 2352 is likely to trigger another potential decline to retest 2337 before targeting the next support at 2315.

However, a break above 2376 may invalidate the preferred bearish scenario to open up scope for the continuation of the bullish up  move to retest the current all-time high area of 2400 in the first step.

Charts are from City Index Advantage TraderPro

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