sp 500 daily outlook tues 02 nov potential mini bull trap risk of a pull back below 2106 resistance

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Key elements

• The U.S. SP 500 Index (proxy for the S&P 500) has a strong performance yesterday as it rocketed in a steep ascend fashion and surpassed last Friday, 30 Nov 2015 high of 2100.
• However, certain technical elements are advocating for a potential excess at yesterday high of 2106 where a potential short-term “bull trap” looms. In terms of momentum, the 4 hour RSI oscillator has flashed a bearish divergence signal with its 1 hour RSI oscillator that has turned down from its extreme overbought level. These observations suggest that the upside momentum of yesterday’s sharp rally has started to abate.
• From an Elliot Wave Principal perspective coupled with Fibonacci relationships, the Index appears to be undergoing a short-term irregular a, b, c flat correction for the wave 4/ in place since last Friday, 30 November 2015 high. Yesterday’s rally may have completed the wave b that surpassed the high of 30 November 2015, the start of wave a. Thus at the current juncture, the Index is likely to shape the wave c of 4/ which is considered as a down movement.
• The significant support to watch will be at 2071, yesteday’s minor swing low follow by 2060 which coincides with the lower boundary of the bullish ascending channel (in orange) in place since 29 September 2015 low and the pull-back support that links the former highs of 09 October to 21 October 2015 (in dotted green).

Key levels (1 to 3 days)

Pivot (key resistance): 2106

Support: 2093, 2071 & 2060

Next resistance: 2138

Conclusion

As long as the 2106 pivotal resistance is not surpassed and a break below the 2093 intermediate support, the Index is likely to shape a pull-back to test the 2071 support with a maximum limit set at 2060.

On the other hand, a break above the 2106 pivotal resistance may invalidate the pull-back scenario for a further squeeze up towards the current all-time high range top at 2138.

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