Technicals | Apr 20 2018
Bottom Line 19/04/18
Daily Trend: Up
Weekly Trend: Neutral
Monthly Trend: Up
Support Levels: 2532 / 2405 / 2322
Resistance Levels: 2802 / 2873 (all time highs)
Technical Discussion
The S&P 500 chart continues to get more interesting by the day with more detail on this from a technical perspective outlined below. Last night [Wednesday]the Index rose for its third straight session, buoyed somewhat by commodity prices being on the bid. Volatility has lowered on this rise higher yet the high volume dips followed by low volume rises since late January continues to see us on the alert. Fundamentally the U.S have their fingers in a fair few pies at the moment and even though there is a sense of calm right at this juncture, geopolitical factors such as trade tensions, U.S led strikes in Syria, as well as Iranian and North Korean issues, could easily flare things again at any moment. And this is something that will continue to be in the back of investors minds for the time being. On a more positive note, there are expectations that Q1 2018 reporting is going to be the strongest for some time, so if this does come to fruition, the S&P 500 may well continue to remain robust throughout this short to medium term corrective phase. Lets take a closer look at the technicals.
Reasons to stay longer term bullish (medium term breather remains in play):
→ S&P 500 earnings remain well supported overall
→ Elliott Wave count continues to have motive bigger picture
→ retracements have been healthy and well supported to this point
→ price has been pushing into new all-time highs
→ corrective trigger looks to have formally commenced on 29th January
Technically the proposed Wave-(4) is what we continue to monitor. A shallow coiling process aligned to a symmetrical triangle is still very real so keep a watch out for the five internal swings to potentially take shape in the form of an (a)-(b)-(c)-(d)-(e) process as shown on our chart. Yet our preference still sits with lower levels being needed and price heading into the more typical 23.6% – 38.2% retracement zone circa 2445 and 2185 respectively. The 200 day moving average is continuing to hold strong yet the situation remains precarious as a third retest of this from our experience tends to have high probability of it being broken below. 'Timing' also needs to be taken into consideration with higher degree waves, so basis this our expectations continue to lean towards a number of more months still being required to complete this corrective phase. Price is back to overbought on the dailies and nearing a lowering line of resistance that could easily create an inflection. We are at a very interesting juncture right here.
Trading Strategy
A fantastic opportunity on the long side may well develop here if the proposed symmetrical triangle ends up being the pattern of choice for the Wave-(4). These are excellent low risk trading opportunities so clearly this is something from a trading perspective that we are going to remain on the look out for. On the flip side if another downside move retests the 200 day moving average, yet on this third occasion breaks below it with the move sticking, then our more typical deeper Fibonacci targets are likely going to come into play. Happy to stay patient for now.
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