sp 500 weekly outlook 05 oct to 09 oct limited upside potential below 19962007 resistance 1491032015

(Click to enlarge charts)

What happened earlier

The U.S. SP 500 Index (proxy for the S&P 500) has plummeted earlier and hit a low of 1871 on 29 September 2015. Thereafter, it managed to recover and closed at the end of the week just a “stone throw” away from the 1965 resistance.

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

Key elements

• Even though the Index is still holding above the “Black Monday”, 24 August 2015 low at 1835, the corresponding weekly (long-term) RSI oscillator is still weak as it remains below its resistances and the 50% neutrality level. This observation indicates a lack of upside momentum (see weekly chart).
• The significant medium-term resistance to watch now is the 1996/2007 zone which is defined by the range-top in place since 28 August 2015 and the failure bullish breakout on 17 September 2015 (see daily chart).
• The intermediate resistance will be at 1965/1975 which confluences with the pull-back resistance (in dotted red), trendline resistance (in pink) joining the highs since 18 August 2015 high @8am and the 61.8% Fibonacci retracement of the recent down move from 18 September 2015 high @12am to the 29 September 2015 low @12pm (see 4 hour chart).
• The 4 hour (short-term) Stochastic oscillator has reached its extreme overbought level and started to inch downwards which indicates limited upside potential for the Index to push higher (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate resistance: 1965/1975

Pivot (key resistance):  1996/2007

Support: 1871 & 1835

Next resistance: 2040/2050

Conclusion

Current technical elements suggest limited upside potential at this juncture for the Index. As long as the 1996/2007 weekly pivotal resistance is not surpassed, the Index is likely to see another downleg towards 1871 before a retest on the “Black Monday”, 24 August 2015 low at  1835.

However, a clearance above the 2007 weekly pivotal resistance may invalidate the “last push down” scenario for a squeeze up to target the next resistance at 2040/2050 in the first step.

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