Chart of the day SP 500 sees risk of further potential downside

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By :  ,  Financial Analyst

Short-term technical outlook on S&P 500 (Thurs, 24 Aug 2017)

What happened earlier/yesterday

The S&P 500 Index (proxy for the S&P 500 futures) had staged a decline of 0.76% from its minor swing high of 2455 printed on 23 August 2017 to today (24 August) Asian session low of 2436.

Yesterday’s fall in the U.S. stock market had been reinforced by a “spook” comment from U.S. President Trump that he threatened to shut down U.S. government if Congress does not pass the bill to fund his campaign promise to build the wall on the Mexican border.

Let’s us now review the Index from a technical analysis perspective.

Key elements

  • Since its current all-time high of 2490 printed on 08 August 2017, the Index has evolved within a minor descending channel with its upper boundary/resistance of the descending channel coming in at 2455 (see hourly chart).
  • The aforementioned descending channel resistance of 2455 also confluences with the 50% Fibonacci retracement of the recent drop from 08 August 2017 high to 21 August 2017 low (see 1 hour chart).
  • The hourly Stochastic oscillator has started to inch down from its overbought region which indicates that short-term downside momentum of price action has resurfaced (see 1 hour chart).
  • The next significant short-term support after last Friday, 18 August minor swing low area of 2420 rests at 2408 which is defined by the lower boundary of the aforementioned minor descending channel and the upper limit of medium-term support zone of 2408/2403 as per highlighter in our latest weekly technical outlook report (click here for a recap) (see 1 hour chart).
  • As seen from the respective ETFs, the S&P Technology sector (XLK) which has the highest single sector weightage of 25% has continued to outperformance the benchmark S&P 500 (SPY). On the contrary, the other key sectors (Industrials, Consumer Discretionary & Financials) which have a combined weightage of 36% continue to underperform against the S&P 500 since its current all-time high printed on 08 August 2017. These observations suggest that the S&P 500 may not be able to stage a significant bullish impulsive upleg at this juncture as the Technology is the sole sector that is holding on the fort (see last chart).

Key Levels (1 to 3 days)

Intermediate resistance: 2444

Pivot (key resistance): 2455

Supports: 2420 & 2408

Next resistance: 2462 (medium-term pivot)


Therefore, as long as the 2455 short-term pivotal resistance is not surpassed, the Index may see a potential push down to retest 18 August 2017 minor swing low area of 2420 and a break below it is likely to open up scope for a further drop to target the next support at 2408.

However, a clearance above 2455 is likely to see a squeeze up to test the 2462 medium-term pivotal resistance set for this week.

Charts are from City Index Advantage TraderPro & eSignal


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Related tags: Indices US

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