sp 500 daily outlook wed 04 may 2016 coming close to short term downside target support of 20442036

(Click to enlarge charts)

What happened earlier/yesterday

The U.S. SP 500 Index (proxy for the S&P 500 futures) has continued to push down lower from the predefined 2083 short-term pivotal resistance to hit a low of 2054 in yesterday’s early U.S. session before it traded sideways.

Current price action is now approaching our expected short-term downside target at 2044/36.

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

Key elements

• Based  on the Elliot Wave Principal and fractal analysis, the Index is likely to be undergoing a potential final downleg, wave v to complete a five wave impulsive bearish cycle/structure of a minor degree, labelled as a. The potential end target of wave v of a rests at the 2044/2036 zone which is defined as a Fibonacci cluster (23.6% projection retracement of the whole up move from 11 February 2016 low to 21 April 2016 high of 2111 + 1.618 projection of the down move distance from 21 April 2016 high to 25 April 2016 low + 0.618/0.764 projection of the down move distance from 21 April 2016 high to 29 April 2016 low) before a potential corrective rebound, wave b materialises.
• The abovementioned 2044/2036 target derived from fractal analysis also confluences with the graphical swing low areas of 8/12 April 2016 at 2036 (see daily chart).
• The significant short-term resistance now stands at 2070 which is today’s current minor swing high and the steeper short-term descending trendline from 28 April 2016 high of 2099.
• The hourly (short-term) Stochastic oscillator has reached an extreme oversold level which indicates limited downside pressure at this juncture as downside momentum is being overstretched. These observations reinforce our preference of a potential mean reversion rally at the 2044/36 support zone.

Key levels (1 to 3 days)

Intermediate support: 2044

Pivot (key support): 2036

Resistance: 2070

Next support: 2005/1995

Conclusion

Since our last short-term update, the Index has continued to inch lower and it is now coming close to the expected short-term downside target (support zone) of 2036/2044.

As long as the daily short-term pivotal support at 2036 is not broken, the Index is likely to shape a potential mean reversion (snap-back) rally to target the 2070 resistance. However, a break below 2036 short-term pivotal support may invalidate the preferred mean reversion tally to see the continuation of the down move towards the 2005/1995 support (medium-term target defined by the former swing high areas of 28 August/17 September 2015 which has been tested thrice and the 38.2% Fibonacci retracement of the whole up move from 11 February 2016 to 20 April 2016 high of 2111).

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