sp 500 daily outlook tues 01 mar 2016 at ascending range support for a potential push up despite yes

(Click to enlarge chart)

What happened yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has continued its descend from last Friday, 26 February 2016 high of 1971 and recorded a decline of 2.48% to hit a low of 1922.

Key elements

• Interestingly, the decline from 1971 high printed on 26 February 2016 has managed to stall just above the lower boundary (support) of the bullish ascending channel in place since 11 February 2016 low at 1920.
• The Index has remained above this week medium-term pivotal support at 1900 as per highlighted in our latest weekly outlook/strategy published yesterday (click here for a recap).
• Based on the Elliot Wave Principal, the Index has traced out a 3 waves movement rally from the 1890 low printed on 24 February 2016 to a last Friday, 26 February 2016 high of 1971 and the recent decline from the 1971 high to yesterday low of 1922 also traced out a 3 waves movement. The support at 1922/20 also confluences with a Fibonacci cluster (61.8% retracement of the rally from 24 February 2016 low of 1890 to last Friday, 26 February 2016 high of 1971 + 0.764 projection from last Friday, 26 February 2016 high of 1971). Therefore, it is likely that  the Index is undergoing a potential short-term “Ascending Range Triangle” pattern that is typically takes the form of 5 sets of 3 waves movement (a,b,c,d,e). Current price action is likely to form the upleg wave d (another 3 waves movement) towards the top of the “Ascending Range” triangle.
• Also from a fractal analysis viewpoint, yesterday decline from last Friday, 26 February 2016 high of 1971 to the current low at the 1922/20 support is similar in magnitude with the last decline seen from the 23 Feb 2016 high of 1946 to the low of 1890 printed on 24 February 2016 (as highlighted by the dotted light green lines) before the Index staged a rally to hit the 1971 high. These observations suggest that potential recovery is round the corner at this juncture.
• The short-term significant resistance stands at the 1971/84 zone with is the top of the “Ascending Range” and also the typical 0.764 Fibonacci projection used in “Triangles” range configuration measured from the up move from 24 February 2016 low of 1890 to last Friday 26 February 2016 high of 1971 projected from current low of 1922.

Key levels (1 to 3 days)

Intermediate support: 1920

Pivot (key support): 1900 (medium-term)

Resistance: 1971/84

Next support: 1874

Conclusion

As long as the 1900 pivotal support holds, the Index is likely to shape a potential push up to target the top of the “Ascending Range” triangle configuration at 1971/84.

On the other hand, failure to hold above the 1900 pivotal support is likely to invalidate the second phase of the countertrend rally for a deeper decline to test the next support at 1874 in the first step.

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