sp 500 eyeing another new potential all time high 2692922017

Short-term Technical Outlook (Thurs, 25 May 2017)

(Click to enlarge charts)

What happened earlier/yesterday

The S&P 500 Index (proxy for the S&P 500 futures) had continued to inch higher after the release of the Fed FOMC minutes of the last monetary policy meeting. It tested it current all-time high at 2406 before it a slight retreat to close at 2404 at the end of the U.S. session.

Key technical elements

• The daily RSI oscillator remains bullish above ascending support at the 40% level and still shows room for further potential upside before it reaches an extreme overbought level. These observations suggest that medium-term upside momentum of price action remains intact (see 1^st chart).
• Based on sector rotation analysis, the Financials and Technology had been the leading sectors since the post U.S. presidential election rally while the typical cyclical sectors such as Industrials and Consumer Discretionary had underperformed against the Financials and Technology. Interestingly, since mid-April 2017, the Industrials and Consumer Discretionary sectors had started to catch-up and narrowed their underperformance gap between the leading sectors especially against the Financials. Current technical elements are now advocating for a further potential push up as seen in their respective ETFs towards their resistances at 69.50 for Industrials (XLI) and 92.70 for Consumer Discretionary (XLY) (see 3^rd & 4^th charts).
• In the shorter-term, the next significant resistance for the Index after the current all-time high of 2406 stands at the 2422/27 zone which is defined by a Fibonacci projection cluster (1.00 projection of the up move from the 18 May 2017 low to 20 May 2017 minor swing high & 1.00 projection of the up move from 17 April 2017 low to 08 May 2017 high) and also the upper boundary of the minor ascending channel in place since 19 May 2017 minor swing low (see 2^nd chart).
• The significant short-term support for the Index now rests at 2396 which is defined by the 23.6% Fibonacci retracement of the on-going up move from 18 May 2017 low to yesterday’s U.S. session high and the minor congestion area of 24 May 2017 (see 2^nd chart).
• The shorter-term hourly Stochastic oscillator has started to inch down from its overbought region and still has room for further potential downside before it reaches its oversold region. These observations suggest that the Index may see the risk of a minor pull-back at this juncture towards the 2404 intermediate support (lower boundary of the aforementioned minor ascending channel & the former minor range top of 09 May/16 May 2017.

Key levels (1 to 3 days)

Intermediate support: 2404

Pivot (key support): 2396

Resistances: 2406 & 2422/27

Next support: 2380

Conclusion

In our previous short-term technical update published yesterday,we are concerned with a less lacklustre market breadth of the S&P 500 that may lead the Index to stage a potential multi-week decline first before a new up leg materialises to resume its medium-term uptrend in place since February 2016 low (click here for a recap).

However, after yesterday’s price action of the Index and the potential positive sector rotation back into the second tier Industrials and Consumer Discretionary stocks, the conviction for a corrective decline has been reduced greatly.

Therefore, the Index may have already completed its intermediate corrective decline on 18 May 2017 and right now it is in the midst of undergoing a potential bullish upleg to print a new all-time high. Given overbought condition seen in the hourly Stochastic oscillator, the Index may see minor pull-back first towards 2404 with a maximum limit set at the 2396 short-term pivotal support before another potential push up to target 2422/27 next in the first step.

However, failure to hold above 2396 is likely to negate the preferred bullish tone to open up scope for a deeper setback towards 2380 (50% Fibonacci retracement of the current up move from 18 May 2017 low + former congestion swing low areas of 03 May/05 May/11 May 2017)

Charts are from City Index Advantage TraderPro & eSignal

Disclaimer

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs. While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments. City Index recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets. It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com.au, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. GAIN Capital Australia Pty Ltd (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.