sp 500 daily outlook tues 26 jan 2016 pull backed towards 186251 support 1794842016

(Click to enlarge chart)

What happened yesterday

The U.S. SP 500 Index (proxy for the S&P 500) has sold off just below the 1915 minor swing high resistance (printed a high of 1911 in the Asian session) in line with a 9.35% decline seen in the WTI oil futures.

Key elements

• The Index has declined by 2.4% from yesterday high of 1911. This pull-back in price action is in line with our expectation as per highlighted in our latest weekly outlook/strategy ((click here for details).
• Current price action is now resting at the pull-back support of the “Expanding Wedge” bullish breakout at 1862 which also confluences with the 50% Fibonacci retracement of recent rally from 21 January 2016 low to yesterday’s Asian session high.
• Right below is the medium-term support at 1851 which is defined by the minor swing low area of 21 January 2016 @3pm and the 61.8% Fibonacci of the rally from 21 January 2016 low to yesterday’s Asian session high.
• The hourly Stochastic oscillator has dipped and reached its extreme oversold level which suggests a potential rebound at this juncture.

Key levels (1 to 3 days)

Intermediate support: 1862

Pivot (key support): 1851

Resistance:  1915

Next support: 1820

Conclusion

As long as the on-going decline holds at the 1851 pivotal support, the Index is likely to see a potential rebound to test the 1915 minor swing high of 19 January 2016 and the 38.2% Fibonacci retracement of the steep decline from 30 December 2015 high to 20 January 2016 low.

On the other hand, a break below the 1851 pivotal support is likely to put the mean reversion/ “snap-back rally” view on hold to see a slide to retest the 1820 range support (neckline of the impending bearish ‘Double Top”).

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