sp 500 daily outlook thurs 31 mar 2016 potential push up within a medium term topping process 180403

(Click to enlarge charts)

What happened yesterday/earlier

The U.S. SP 500 Index (proxy for the S&P 500 futures) has pushed up and broke above the 2058 medium-term pivotal resistance and invalidated our direct drop bearish scenario.

The market is still in an “intoxication state” after Yellen’s dovish speech on 29 March 2016 to go slow on future policy benchmark interest rate hikes due to a weak global growth situation. The key emphasis is that we are now in a situation where demand for goods and services will be lacklustre on a global scale which translates into weaker net earnings growth.  

However, short-term momentum remains positive plus “traditional” window-dressing for end Q1 2016 where the fund managers’ books of equities holdings is likely to be “beautified” to show a positive quarterly return. Therefore, it will be prudent not to fight such “animal spirits” for now.

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

Key elements

• The Index is still evolving within a bearish “Ascending Wedge” with its upper limit (resistance) at 2081 and lower limit (support) now at 2052.
• The upper limit (resistance) of a bearish “Ascending Wedge” of 2081 confluences closely with the descending trendline that has linked the lower lows of the impending “Double Top” since the current all-time high of 2138 printed in May 2015, a Fibonacci projection cluster and the swing high areas of 17 and 29 December 2015.
• The daily (medium-term) RSI oscillator continues to flash exhaustion signals in this current up move as it has traced out a bearish divergence signal at the overbought region.
• However, on the shorter-term (hourly) Stochastic oscillator has just exited from its oversold region and still has ample room for further potential upside before reaching its extreme overbought level.

Key levels (1 to 3 days)

Pivot (key support): 2052/50

Resistance: 2081

Next support: 2020

Conclusion

Short-term upside momentum remains intact despite exhaustion signals being seen from longer-term technical elements. Therefore as long as the 2052/50 daily short-term pivotal support holds, the Index may still see a further push up to target the next significant resistance at 2081 before a pull-back sets in. We are still in a state of medium-term potential topping process except it takes time to work out due to current central bank’s “smoothing speeches/policies”.

On the flipside, a break below the 2052/50 pivotal support is likely to ignite our initial medium-term bearish direct drop scenario towards the next support at 2020 in the first step.

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