S&P500: Critical Point

Technicals | Jan 31 2020

Bottom Line 30/01/20

Daily Trend: Down
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 3212 / 3070 / 3028 / 2950
Resistance Levels: 3338 (all time highs in play)

Technical Discussion

Reasons to stay longer term bullish:
-S&P 500 earnings have overall been well supported
-Elliott Wave count continues to have motive bigger picture
-retracements have been healthy and well supported to this point
-Higher degree Wave-[4] has locked in a major low back in December 2018

So a healthy breather soon as part of a minor degree wave-(iv) would be more than acceptable. And if it were to start to unfold from here then the typical 38.2% wave-(iv) pull back area comes in around the 3150 mark. It may seem like a decent retracement yet basis the bigger picture aspects of the price chart, it would only be defined as a minor dip.'

The above statement was from our last review last week and since then the wave-(iv) move lower appears to have now triggered. Interesting to note last night the gap fill at 3281 which saw price reject and head lower. With sellers coming on board late in the session after price was in the green for most of the day.

The key feature of the chart for mine though from an Elliott Wave perspective is whether we see the proposed wave-(iv) follow the laws of alternation. This law dictates that if the wave-(ii) is a drawn out and a sideways or triangle complex pattern, which as you can see on chart it was, then the wave-(iv) will often unfold as a quicker and more simple a-b-c zig zag type pattern. We've shown what this scenario would look like on our chart tonight which lines up nicely to our typical wave-(iv) 38.2% pull back zone circa 3150. Any serious drop below here though and we may need to reassess things. Lets see how it goes.

Trading Strategy

We remain long at 3032 with our stop recently raised to 3211. So some nice profits have been locked in. Yet if we are correct with the above analysis then our position will likely be stopped out in the coming days. We are Ok with this. It's been a good trade yet we need to stick with our risk management strategy without fail on the understanding that U.S markets could easily do anything from here, and in either direction. So respect the stop.

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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