sp 500 daily outlook wed 13 apr 2016 coming close to 2081 key medium term resistance 1806022016

(Click to enlarge charts)

What happened yesterday/earlier

The U.S. SP 500 Index (proxy for the S&P 500 futures) has pushed higher than expected and surpassed our short-term pivotal resistance 2056/60 which invalidated our preferred push down towards the short-term range support scenario. Please click on this link for a recap on our previous short-term daily outlook/strategy.

The main likely reason for this rally seen in the S&P 500 is driven by WTI oil rather than focusing on the current Q1 2016 earnings session. Unconfirmed reports cited by media that the Saudi Arabia and Russia has agreed to an oil production freeze in the upcoming Doha meeting on 17 April 2016 between OPEC and non-OPEC members despite Iran not agreeing to any freeze.

Key elements

• Since the break above the intermediate resistance zone of 2056/60, the Index has not make any significant pull-back and continued to surge in the current European session. Current high of 2075 is coming close to the medium-term pivotal resistance at 2081 (just 0.3% away) (see daily chart) (click here for more details in our latest weekly strategy/outlook).
• Yesterday’s bullish breakout above the former short-term bearish channel is now pull-back support at 2050. Above 2050 lies a minor support at 2065 which is the former minor swing high area of 07 April 2016 where price action has tested in today’s European session and rallied off from it.
•  Yesterday’ daily settlement price of WTI oil futures at 42.17 is the highest so far for 2016.  From a low of 35.24 seen on 05 April 2016, WTI has recorded a steep rally of 19%. The 4 hour Stochastic oscillator has started to show signs of exhaustion as it has flashed a bearish divergence signal and started to turn down from its overbought region. However, price action is still being supported at 40.13 (ascending trendline from 05 April 2016 low + former swing high from 28 March 2016). The WTI needs to break below 40.13 in order to open up scope for a significant potential downside movement (see last chart).

Key levels (1 to 3 days)

Pivot (key resistance): 2081 (weekly pivot)

Supports: 2065 & 2050

Next resistance: 2100

Conclusion

The Index is now coming close to the medium-term pivotal resistance at 2081 where we have started to see some signs of exhaustion in the recent steep run up in WTI oil. A pull-back in price action is possible towards the first support at 2065 but its needs to break below 2065 to trigger a deeper potential decline towards the next support at 2050 in the first step.

However, a break above the 2081 medium-term pivotal resistance is likely to invalidate the medium-term bearish scenario and see a further potential upside movement (the continuation of the countertrend rally from 11 February 2016 low) to target the next resistance at 2100 in the near term.

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