sp 500 corrective decline likely over start of a new upleg 1846182017

Short-term Technical Outlook (Fri, 10 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 dropped as expected and almost hit the first downside target/support at 2353 (printed a low of 2354) before it reversed up by 0.44% to close slightly higher at 2364 at the end of the U.S. cash equities session  versus an opening level of 2363.

Please click here for a recap on our previous short-term technical outlook.

Key technical elements

• Based on the Elliot Wave Principal and fractal analysis, yesterday down move has met the minimum criteria to conclude a potential end of the minor degree wave 4 in place since the decline from the current all-time high of 2400 printed on 02 March 2017. The minimum end target of 2353 has almost been met (38.2% retracement from 01 Feb 2017 low to 02March 2017 high & 1.00 projection from 02 March 2017 high).
• In addition, the hourly candlestick has formed a bullish “Hammer” pattern just right above the 2353 level coupled with a bullish divergence signal seen in its hourly Stochastic oscillator at the oversold region. These observations suggest an exhaustion of the bearish move in place since 02 March 2017 high and reinforce the potential start of a new upleg to kicks tart the bullish impulsive minor degree wave 5 of 3/ (Elliot Wave Principal).
• The hourly Stochastic oscillator has reached an extreme overbought level which suggests that the Index may shape a minor pull-back at this juncture towards the pull-back support of the former minor descending channel’s upper boundary at 2366 (see hourly chart).
• From a sector rotation perspective, the leading sector since the start of the post U.S. Presidential Election rally is the Financials.  Yesterday, the Financials ETF (XLF) recorded a gain of 0.36% yesterday (3^rd best performing sector below Energy & Health Care) and its daily technical chart has started to exhibit bullish elements. Yesterday’s price action has formed a daily “Doji” candlestick pattern right above the 24.60 short-term pivotal support which indicates a slow-down in downside momentum seen in the previous day down move on Wednesday, 08 March 2017. In addition, the daily RSI has tested and staged a rebound from its first support which suggests a revival in upside momentum of price action.

Key levels (1 to 3 days)

Intermediate support: 2366

Pivot (key support): 2353

Next resistances: 2373, 2384 & 2400

Next supports: 2348 & 2338

Conclusion

The recent down move from the current all-time high area of 2400 may be over. Right now, the Index is likely to shape a minor pull-back towards the intermediate support at 2366 before it resumes another potential leg of up move. A break above 2373 will reinforce the aforementioned up move to target the next near-term resistances at 2384 and 2400.

However, failure to hold above the 2353 short-term pivotal support is likely to invalidate the preferred bullish bias to trigger the continuation of the corrective decline towards the next support at 2348 and even test the 2338 medium-term pivotal support.

Charts are from City Index Advantage TraderPro & eSignal

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