sp 500 weekly outlook update 28 sep to 02 oct potential rebound before risk of a further slide towar

(Click to enlarge charts)

What happened earlier

The U.S. SP 500 Index (proxy for the S&P 500) has broken below the 1910 expected sideways range support and invalidated our preferred push up scenario.

Please click on this link for a recap on our initial weekly outlook.

Key elements

• The Index is still above the “Black Monday”, 24 August 2015 low at 1835 which is also the low of the weekly bullish “Hammer” candlestick. A similar “Hammer” candlestick pattern was formed on last year, 12 October 2014 with almost the same low at 1820 (see weekly chart).
• The key long-term support now stands at 1730/1720 which is defined by the lower boundary of the long-term ascending channel (in orange) in place since the start of this major bullish cycle on March 2009 (see weekly chart).
• The weekly (long-term) RSI oscillator remains bearish below its pull-back resistance and the 50% neutrality level (see weekly chart).
• On the medium term (1-3weeks), the significant resistance to watch will be at 1965 which is defined by the pull-back resistance of the former trendline support joining the lows from 02 September 2015@12am and the 61.8% Fibonacc retracement of the recent down move from 18 September 2015 high @12am to the current low of 1871 seen on 29 September 2015 (see 4 hour chart).
• The 4 hour (short-term) Stochastic oscillator has just exited from the oversold region which suggests that the current down move is overextended and a potential rebound is round the corner (see 4 hour chart).

Key levels (1 to 3 weeks)

Intermediate resistance: 1940

Pivot (key resistance): 1965

Support: 1835/1820

Next resistance: 1996

Conclusion

The Index may now see a short-term “relief rebound” first towards the key medium term resistance zone at 1940/1965 before another downleg occurs to target the “Black Monday”, 24 August 2015 low at 1835/1820.

On the other hand, a clearance above the 1965 weekly pivotal resistance is likely to negate the expected bearish tone to see a squeeze up to retest the range top in place since 28 August 2015 at 1996.

Disclaimer

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this email, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs. All queries regarding the contents of this material are to be directed to City Index, a trading name of GAIN Capital Singapore Pte Ltd.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit cityindex.com.sg for the complete Risk Disclosure Statement.