sp 500 a minor top may have been formed at 2100105 1817712016

Daily Outlook, Wed 22 June 2016 (Click to enlarge charts) What happened earlier/yesterday The U.S. SP 500 Index (proxy for the S&P 500 futures) has […]

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By :  ,  Financial Analyst

Daily Outlook, Wed 22 June 2016
S&P500 (4 hour)_22 Jun 2016

S&P500 (1 hour)_22 Jun 2016

SPX & VIX futures_22 June 2016

(Click to enlarge charts)

What happened earlier/yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has traded sideways below the predefined 2100/105 short-term pivotal resistance as highlighted in our daily short-term technical outlook/strategy.

Yesterday’s price action seen in the benchmark U.S. stock indices have underperformed its European counterparts despite Fed chairwoman Yellen’s “relatively dovish” testimony to Congress (Senate Banking Committee) that triggered a speculation that in the marketplace that Yellen is one of the six Fed officials that has projected only one policy interest rate hike for 2016 in the last FOMC meeting in June versus a median projection of two interest rate hikes.

Technically speaking, yesterday’s price action on the S&P 500 suggests further potential weakness ahead at least in the short to medium-term. Elements will be further discussed below.

Please click on this link for a recap on our prior daily short-term technical outlook/strategy.

Today key U.S. economic data releases/events

  • Existing Home Sales (m/m) for May @1400GMT (5.54m estimate)
  • Fed chairwoman Yellen testifies on monetary policies to Congress members (House Financial Services Committee) @1400 GMT

Key elements

  • Despite trading in sideways fashion, the Index has broken below the earlier highlighted bearish “Ascending Wedge” support at 2094 where the magnitude of its “higher highs” is lesser than the magnitude of its corresponding “higher lows”. Interestingly, it has retested the 2094 level in yesterday mid- U.S. session but failed to make any breakout.
  • The rally from last Thursday, 16 June low of 2049 has been capped by a short-term descending trendline resistance (depicted in pink) from 09 June 2016 high of 2121 which also confluences with the aforementioned retested level of 2094 (see 1 hour chart).
  • Based on the Elliot Wave Principal and fractal analysis, the rally from last Thursday, 16 June 2016 low of 2049 is likely to be considered as corrective in nature (dead cat bounce) with its potential end target at 2100/105 derived from a Fibonacci cluster. Therefore, the Index may be now in the midst of undergoing the start of another bearish impulsive down move at least similar in magnitude of the prior decline from 09 June 2016 high to 16 June 2016 low of 2049.
  • From an implied volatility and contrary opinion standpoint, the VIX futures is still holding above its support after its rebound from the “complacency zone” of 12.80/10.10 that occurred in early April 2016 that lead to a decline of close to 4% on the S&P 500 from its resistance of 2100. Current price action of the VIX futures is still showing further upside potential before hitting a “fear zone” of 26.40/28.25 and with the S&P 500 just hovering below the 2100 resistance, these observations suggest that market participants on the average are still complacent in the pricing of risk that can lead to a potential decline on the S&P 500 at this juncture (see last chart)
  • The key short-term pivotal resistance remains at 2100/105

Key levels (1 to 3 days)

Pivot (key resistance): 2100/105

Supports: 2083 & 2065

Next resistance: 2110/21 (medium-term pivot)


Maintain short-term bearish bias as the Index may have seen a minor top. As long as the 2100/105 short-term pivotal resistance is not surpassed and a break below 2083 is likely to add impetus for a further potential decline to target the next short-term support at 2065 in the first step.

However, a clearance above the 2100/105 short-term pivotal resistance may negate the preferred bearish tone to see a further squeeze up towards the 2110/21 medium-term pivotal resistance.

Charts are from Advantage TraderPro & eSignal


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