sp 500 daily outlook fri 13 may 2016 eying 203936 support next vulnerable for a potential bearish br

(Click to enlarge charts)

What happened earlier/yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has tumbled as expected after it tested the predefined short-term intermediate resistance of 2075 and hit our short-term downside target at 2054.

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

Today key U.S. economic data release will be as follow:

1)      Retail Sales for Apr @1230GMT

2)      Reuters/Michigan Consumer Sentiment Index for Apr @1400GMT

3)      Baker Hughes U.S. Oil Rig Count @1700 GMT

Do take note of the data for retails sales as it indicates the “health” of consumers spending which is one of the key statistics that the U.S central bank, Fed is monitoring to decide on the timing of the next policy interest rate hike. After a negative growth of -0.3% seen in March, economists on the average are now expecting a strong recovery in retail sales for Apr with a consensus set at 0.8% m/m growth.

If retail sales for April come inline or beat expectations, the timing of the next interest rate hike is likely to push forward which tends to be negative for equities and positive on the U.S. dollar.      

Key elements

• In today, 13 May 2016 European session, the Index is now challenging the 2054 support level again (minor congested swing lows area of 09/10 May 2016 + 61.8% Fibonacci retracement of the current push up from last Friday, 06 May 2016 low to 11 May 2016 high of 2085).
• The next significant support rests at 2039/36 which is the neckline support of the impending bearish “Head & Shoulders” and the 23.6% Fibonacci retracement of the rally seen from 11 February 2016 low to 21 April 2016 high of 2111. The exit potential of this impending bearish “Head & Shoulders” breakout stands at 1960 (medium-term,1 to 3 weeks)) which also confluences with a Fibonacci cluster (see daily chart).
•  On the shorter-term (1 to 3 days), the support to watch after 2036 rests at 2020 which is defined by a 1.618 Fibonacci projection of the recent down move from 11 May 2016 high of 2085 to 13 May 2016 low of 2053 projected from 13 May 2016 high @2am (the swing high of the minor rebound seen in yesterday’s U.S. session after price action tested the 2054 support).
• Based on the Elliot Wave Principal, current price action is likely to be undergoing a bearish impulsive wave iii of a minor degree with the corrective minor rebound (wave ii) that may have topped at 2071 (50% Fibonacci retracement of the recent decline from 11 May 2016 high of 2085 to yesterday low of 2053 + minor descending trendline resistance from 11 May 2016 high as per highlighted in pink). The potential end target of the downleg wave iii stands at 2020 (1.618 Fibonacci projection as per aforementioned) (see 1 hour chart).
• The hourly (short-term) Stochastic oscillator has just exited from the oversold region which highlights the risk of a minor rebound at the 2054 support.

Key levels (1 to 3 days)

Intermediate resistance: 2065

Pivot (key resistance): 2071

Supports: 2054, 2039/36 & 2020

Next resistance: 2080/83 (weekly pivot)

Conclusion

The medium-term bearish trend remains intact but given the current oversold condition seen in price action, we cannot rule out a minor rebound to occur at the 2054 support towards the intermediate resistance at 2065 with a maximum limit set at the tightened 2071 daily short-term pivotal resistance before another downleg occurs to target the 2039/36 support. 

Do note that a break below the significant 2039/36 significant support (neckline of the “Toppish” configuration) is likely to indicate that an intermediate term top has formed right below the 2100 resistance. In the first step, the Index is likely to see a further push down towards the next short-term support at 2020.

Only a break above the 2071 short-term pivotal resistance may put the bears on hold to see a further push up to retest the current medium-term weekly pivotal resistance at 2080/83.

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