S&P500: Something Has To Give

Technicals | Dec 14 2018

Bottom Line 13/12/18

Daily Trend: Down
Weekly Trend: Down
Monthly Trend: Down
Support Levels: 2550 – 2500 / 2417
Resistance Levels: 2817 / 2941 (new all time highs)

Technical Discussion

News headlines suggest that US trade talks with China are progressing. President Trump certainly hasn't been throwing the abusive tweets around about this as much as he has been over the past few months, so maybe this is a telling signal. He has stated recently that China is back buying a 'tremendous' amount of American Soybeans again yet CBOT (CME Group) traders have confirmed nothing of the sort. The usual smoke and mirrors more than likely as we continue in an environment where it has become almost impossible to distinguish between what is fact and fiction. The last couple of sessions on the S&P 500 have been interesting though. Strong opens finishing with weak closes as buyers continue to lack commitment. Only a move above 2817 is going to provide confidence that the worst may be over, be it this scenario is the least favored by most.  

Reasons to stay longer term bullish (caution remains short to medium term):
→ S&P 500 earnings remain well supported overall (be it some valuations stretched)
→ Elliott Wave count continues to have motive bigger picture
→ retracements have been healthy and well supported to this point
→ price has been consistently pushing into new all-time highs
→ Higher degree Wave-(4) unfolding may still require more depth

'So if our complex corrective Wave-(4) or Wave-[4] is in play here and unfolding as an A-B-C flatter type pattern, then this corrective phase that has been evolving all year, may well be coming to a close very soon. Only a move below 2500 that sticks is going to put our analysis on notice.' Ok so here are the two scenarios we feel could be going on. Both continue to align a final Wave-C of (4) (of some degree) trying to complete. With the first option, we are watching to see whether a mini double bottom has locked into place completing the larger A-B-C move that has been unfolding all year, with price now looking to head higher as part of a higher degree Wave-(5).

The other option is that the Wave-(C) needs more time to complete with deeper levels still being required. It would mean the wave-(C) unfolding as an (a)-(b)-(c) move with equality targeted as a minimum just below the 2550 – 2500 support zone (see chart and video tonight). Price is oversold, volume is mixed, and price action over the past couple of sessions is unwilling to close anywhere near its intraday highs. Something has to give soon, and it could easily be in either direction. Make or break time right here.

Trading Strategy

No trade here until price action can provide us with a more conclusive lead. There is one other option as well, and that is that price has locked in a major top and we are now in a major multi year bear market. This isn't on our radar right at this juncture yet it is always planted in the backs of our minds. Regardless of short to medium term outcomes , if our Wave-(4) positioning of the trend is correct, then trading the Wave-(5) move higher when it is ready to go, continues to be top of mind. Patience til then.

Re-published with permission of the publisher. www.thechartist.com.au All copyright remains with the publisher. The above views expressed are not by association FNArena's (see our disclaimer).

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