sp 500 weekly outlook 16 nov to 20 nov close to 1994 key support for a potential recovery 1765402015

(Click to enlarge charts)

What happened last week

The U.S. SP 500 Index (proxy for the S&P 500) did not shape the intended “last push up” scenario towards the 2138 range top and tumbled straight right towards the expected downside target of 2018.

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

Key Economic Data Release/Events

• 17 Nov (Tues) – Consumer Price Index for Oct @1330 GMT
• 17 Nov (Tues) – Industrial Production for Oct @1415 GMT
• 17 Nov (Tues) – NAHB Housing Market Index for Nov @1500 GMT
• 18 Nov (Wed) – Housing Starts for Oct @1330 GMT
• 19 Nov (Thurs) – Initial Jobless Claims for week ending Nov 13 @1330 GMT

Key elements

• The current 5.3% decline seen from the 2116 high printed on 04 November 2015 has reached the key medium-term support zone of 2018/1994 (see daily chart).
• The aforementioned key support zone of 2018/1994 is defined by the pull-back support area of the “Double Bottom” bullish breakout, the descending pull-back support (in dotted green)  joining the former highs of 21 July 2015, 18 August 2015 and 21 October 2015, the 50% Fibonacci retracement of the up move from 29 September 2015 low to 04 November 2015 high and 1.618 Fibonacci projection of the down move from 04 November 2015 high to 10 November 2015 low @12am projected from 11 November 2015 high @8pm (see 4 hour chart).
•  The daily (medium-term) Stochastic oscillator has reached its extreme oversold level where price action has found its swing low and shaped a significant rebound later (as per shaded by the blue ovals). This observation suggests that the downside momentum has reached a “capitulation”/”overextended” point where a potential recovery in price action is round the corner (see daily chart).
• The intermediate resistance to watch will be at 2073 which is defined by the pull-back resistance, descending trendline from the 04 November 2015 high and the 61.8% Fibonacci retracement of the down move from 04 November 2015 high to the current low seen today, 16 November 2015 (see 4 hour).
• The key medium-term resistance remains at the 2138 range top in place since May 2015.

Key levels (1 to 3 weeks)

Intermediate support: 2018

Pivot (key support): 1994

Resistance: 2073 & 2138

Next support: 1871

Conclusion

Technical elements suggest that the current pull-back from the 04 November 2015 high has reached or is closed to its key inflection level. As long as the 1994 weekly pivotal support holds, the Index is likely to shape a potential push up to test the 2073 intermediate resistance and a break above it is likely to give more credence in the recovery scenario to retest the 2138 range top in the first step.

On the other hand, a clear break below (daily close) the 1994 pivotal support is likely to invalidate the recovery scenario to see a further correction toward the 29 September 2015 swing low of 1871.

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