sp 500 weekly outlook for 19 jan to 23 jan potential push up above expanding wedge top above 1970 su

What happened last week

The S&P 500 has broken below the weekly pivotal support at 1990 but managed to stage a recovery above it last Friday, 16 January 2015. A volatile trading week indeed!

Key elements

• The upper and lower limits of the long-term ascending channel (in light blue) stands at 2100 and 1900 respectively (see weekly chart).
• The 2140/2170 resistance zone also confluences closely with multiple Fibonacci projection levels from various degrees (see weekly chart).
• The long-term RSI oscillator continues to display a bearish divergence signal but it is still holding above its support (see weekly chart).
• The Index has tested and managed to close above the 20-day Moving Average now acting as a support at around 1970 (see daily chart).
• Since early December 2015, price actions are now tracing out an impending “Expending Wedge” pattern with upper and lower limits at 2100 and 1970 respectively. This type of configuration tends to be associated with “wild price swings” which explains the relative high volatility seen in the Index for the past one month (see daily chart).
• The short-term trendline resistance joining the highs since 09 January 2014 is capping the Index at 2025 (see 4 hour chart).
• The short-term Stochastic oscillator has exited from the overbought region which suggests a risk of a pull-back (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate support: 1996

Pivot (key support): 1970

Resistance: 2025, 2064 & 2100

Next support: 1920/1900

Conclusion

More evidence are indicating that the S&P 500 is coming to the “tail-end” of its bullish trend in place since October 2011 through the “persistent” bearish divergence signal flashed out by the weekly RSI oscillator and the recent impending “Expanding Wedge” configuration in play which reinforces the current high volatility environment. Typically, such high volatility seen in stock prices reflect a state of “uneasiness” in the mindset of market participants.

From a multi-week perspective, it is likely that we can still see a push up (based on the preferred Elliot Wave count) towards 2064 before the “Expanding Wedge” top at 2100 as long as the weekly pivotal support at 1970 holds.

On the other hand, a break below 1970 may see a deeper decline to test the long-term support at 1920/1900.

Disclaimer

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