sp 500 weekly outlook 19 oct to 23 oct coming close to 20502060 risk zone for a potential pull backc

(Click to enlarge charts)

What happened last week

The U.S. SP 500 Index (proxy for the S&P 500) has held above the 1992 weekly pivotal support despite a slide seen in the first half of the week before reversing up. Since the 29 September 2015 low, it has rallied by 8.5% to last Friday high within 3 weeks which is the best performance recorded for the Index in this year.

Current price action is now approaching the expected upside target zone of 2040/2050. Please click on this link for a review on our prior weekly outlook.

Key elements

• Current price action is now resting below the 2050/2060 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 and upper boundary of a shorter-term ascending channel in place since 29 September 2015 low (see daily & 4 hour charts)
• The weekly (long-term) RSI oscillator remains capped by its trendline resistance since June 2014 (see weekly chart).
• In terms of Elliot Wave count, the Index is undergoing the 5^th wave from 15 October 2015 low @4am of a larger degree impulsive bullish wave structure to complete the wave 1/. Thereafter, the Index faces the risk of a deeper pull-back/consolidation of a wave 2/ before the bullish wave 3/ materialises (see 4 hour chart).
• The 4 hour (short-term) Stochastic oscillator has just exited from its overbought region which highlights the risk of a pull-back/consolidation in price action of the Index (see 4 hour chart).
• The  pull-back support of the “Double Bottom” bullish breakout is at 1992 follow by the lower boundary (support) of the ascending channel that is at 1974 (see 4 hour chart).
• The ascending channel support at 1974 also confluences with the minor swing low area of 07 October 2015 @4am and the 38.2% Fibonacci retracement of the up move from 29 September 2015 low to the current high of 2035 seen at 19 October 2015 @3pm (see 4 hour chart).
• The next significant resistance to watch will be at 2128/2138  which is defined by the potential exit target of the “Double Bottom” bullish breakout and multi-month range top in place since end May 2015 (close to the all-time high printed on 18 May 2015) (see daily chart).

Key levels (1 to 3 weeks)

Intermediate support: 1992

Pivot (key support): 1974

Resistance: 2050/2060 & 2128/2138

Next support: 1900 & 1871

Conclusion

The Index is now approaching a significant resistance zone of 2050/2060 and aforementioned  technical elements have highlighted the risk of an imminent  deeper pull-back/consolidation. The key support to watch will be at the 1992/1974 zone before another round of potential rally materialises to target the next resistance at 2128/2138.

However, a break below the 1974 weekly pivotal support is likely to jeopardise the medium-term term uptrend in place since 29 September 2015 low for a choppy decline to test 1900 and even the 29 September 2015 low at 1871.

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