sp 500 weekly outlook 12 oct to 16 oct medium term uptrend remains intact above 1992 support 1553872

(Click to enlarge charts)

What happened last week

The U.S. SP 500 Index (proxy for the S&P 500) has broken above the 2007 resistance and invalidated the “last push down” scenario to retest the “Black Monday”, 24 August 2015 low of 1835.

Key elements

• Last week’s price action has continued to rebound higher from the trendline support (in dark blue) joining the lows since 07 August 2011 after the formation of the prior weekly bullish “Hammer” candlestick patterned sighted for the week ended on 02 October 2015 (see weekly chart).
• The aforementioned trendline support also coincides closely with the 23.6% Fibonacci retracement of the multi-year up move from 11 September 2011 low to the current all-time 18 May 2015 high (see weekly chart).
• The weekly (long-term) RSI oscillator is now challenging its resistances and the 50% neutrality level (see weekly chart).
• The Index has staged a bullish breakout from a “Double Bottom” chart formation in place since the “Black Monday”, 24 August 2015 low of 1835. This type of chart formation’s bullish breakout indicates a change of sentiment from bearish to bullish after a significant decline (the Index has tumbled by 12% from its current all-time high printed on 18 May 2015). The pull-back support of the “Double Bottom” bullish breakout stands at 1992 (see daily chart).
• The daily (medium-term) RSI oscillator has broken above its former resistance and still has room for further potential upside before reaching its overbought region. This observation suggests that upside momentum remains intact (see daily chart).
• The medium-term (1 to 3weeks) significant resistance stands at 2040/2050 which is defined by the pull-back resistance of the former swing lows from 11 March to 05 June 2015, the 200-day Moving Average (see daily chart).
• The next resistance to watch will be at 2128/2138 which is defined by the potential exit target of the “Double Bottom” bullish breakout and the congestion zone’s upper limit (close to the all-time high seen on 18 May 2015) (see daily chart).
• Based on the Elliot Wave Principal, the Index has started to evolve into a bullish impulsive wave structure from 29 September 2015 low. Current price action is in the midst of completing an extended wave 3 with a 2.00 Fibonacci projection target of 2030 from 29 September 2015 low to 02 October 2015 low @8pm that is closed to the 2040/2050 resistance. Thereafter, a corrective (down) wave 4 is likely to occur before another potential uplege (wave 5) materialises to complete the bullish impulsive five wave structure of 1/ (see 4 hour chart).

Key levels (1 to 3 weeks)

Pivot (key support): 1992

Resistance: 2040/2050 & 2128/2138

Next support: 1900 & 1871

Conclusion

Technical elements have turned positive to see a potential further push up towards the intermediate resistance at 2040/2050. Thereafter, the Index may see the risk of a corrective pull-back with a maximum limit set at the 1992 weekly pivotal support before another potential upleg materialises to target the 2128/2138 resistance zone.

On the other hand, failure to hold above the 1992 weekly pivotal support may  invalidate the expected bullish scenario for a slide back to retest the 1900 support and even the 29 September 2015 low of 1871.

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