sp 500 weekly outlook 02 nov to 06 nov risk of further pull back towards 20462018 support before ups

(Click to enlarge charts)

What happened last week

The U.S. SP 500 Index (proxy for the S&P 500) has managed to surge higher as expected and printed a high of 2100 in the Asian session on 30 October 2015.

Please click on this link for a review on our prior weekly outlook/strategy.

Key Economic Data Release/Events

• 02 Nov (Mon) – ISM Manufacturing PMI for Oct @1500 GMT
• 04 Nov (Wed) – ADP Employment Change for Oct @1315 GMT
• 04 Nov (Wed) – ISM Non-Manufacturing PMI for Oct @1500 GMT
• 04 Nov (Wed) – Fed’s Yellen Speech @1500 GMT
• 06 Nov (Fri) – Nonfarm Payrolls for Oct @1330 GMT

Key elements

• Since the 29 September 2015 low, the Index has continued to evolved within a bullish ascending channel (in orange) with its lower boundary (support) now at 2046 (see 4 hour chart).
• The 2046 ascending channel support also confluences closely with the former pull-back resistance of the former swing lows from 11 March to 05 June 2015 (in dotted purple), the 200-day Moving Average and the 23.6% Fibonacci retracement of the up move from 29 September 2015 low to 30 October 2015 high (see daily & 4 hour charts).
• The upper limit of pull-back support for the “Double Bottom” bullish breakout stands at 2018 which also coincides closely with the 38.2% Fibonacci retracement of the up move from 29 September 2015 low to 30 October 2015 high (see daily & 4 hour charts).
• The 4 hour (short-term) RSI oscillator has broken below its trendline support with a prior bearish divergence signal and still has room for further downside before reaching its oversold region. This observation suggests the risk of a further pull-back in price action from last Friday, 30 October 2015 high of 2100 (see 4 hour chart).
• The exit potential of the “Double Bottom” bullish breakout stands at 2128/2138 which also confluences with range top in place since 18 May 2015 and the 1.618 Fibonacci projection from 24 August 2015 low to 28 August 2015 high projected from 29 September 2015 low (see daily & 4 hour charts).
• Based on the Elliot Wave Principal, the Index is in the midst of undergoing a corrective (bearish) wave 4/ with key support zone at 2046/2018 before another upside movement to complete the wave 5/ of the bullish impulsive wave structure, labelled as (1) in place since the “Black Monday”, 24 August 2015 low.

Key levels (1 to 3 weeks)

Intermediate support: 2046

Pivot (key support): 2018

Resistance:  2128/2138

Next support: 1992

Conclusion

The Index is now undergoing a pull-back in price action towards the 2046 intermediate support with a maximum limit set at the 2018 weekly pivotal support. Thereafter, the Index is likely to resume its medium-term upside movement to target the next resistance at 2128/2138.

On the other hand, a break below the 2018 weekly pivotal may see a deeper slide to test the lower limit of pull-back support for the “Double Bottom” bullish breakout at 1992.

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