SP 500 (SPX): Significant Bullish Statement
- The potential bearish Head & Shoulder has been busted, instead with an extraordinary deployment of strength bulls have achieved a “V” bottom breaking out of a Bullish Flag.
- Sp 500 is back in the upper range of the one year trading range only 35.66 handles from the May 2015 all time high. It seems probable that from the May 2015 high price has unfolded a corrective 3-wave down leg (Zig Zag) hence odds should favor a bullish resolution with an extension of the February up leg. In addition this time bulls have in their favor a bullish cross of the 50 dma above the 200 dma.
- If the tame pullback of the February-April up leg is done bulls have to finish off the move by breaking, from the May 2015 high, the sequence of lower low/high by breaching the November 2015 peak at 2116.14 if this is the case then odds should favor the resumption of the up trend from the 2009 low.
- Barring a failure at the May 2015 top the upside target could be located in the range 2212 – 2327 (Based upon the 0.618 and equality extension)
- If the bullish scenario plays out maybe SP 500 could be carving out an Ending Diagonal, which will conclude the rally from the March 2009 low
Weekly time frame:
- A wide range body has followed two weeks ago Doji with the bottoming tail at the 50 wma. The break out of the Bullish Flag should have concluded the pullback from the April high, hence odds should favor the resumption of the up trend with another up leg from the February low.
- Usually a wide range body is followed by a small range body, in which case next week we could expect some consolidation activity.
- Support is located at S1 = 2084 and S2 = 2073. If S2 were breached then the bullish scenario could be jeopardized
- The resistance is located in the range 2111 – 2117 and at the May 2015 ATH = 2134.72
- Weekly oscillators are bullish: The RSI has a higher high (Above the April peak) and now we can draw a trend line that should not be breached if price has resumed the up trend. The Stochastic has reclaimed the 80 line while the MACD has resumed its up trend
Daily time frame:
- A Powerful break out of the Bullish Flag has most likely concluded a shallow pullback from the April high
- On a short-term time frame bases the move from the May 19 lod is extended (End of day print above the upper Bollinger Band) hence next week odds should favor some type of consolidation/pause. Friday´s Marubozu could be the first part of a short-term reversal pattern if next Monday SP 500 ends with a small range body (Signalling buying exhaustion)
- Above Friday´s eod print we have R1 = 2100, then there is a pocket of air until the April high located at 2111
- The loss of S1 = 2094 should trigger a pullback with a potential target in the range S2 = 2085; Rising 5 dma = 2081; Wednesday´s gap fill = 2076
- The bullish scenario could be jeopardized if Wednesday´s gap were closed
- Daily oscillators are bullish (The RSI has reclaimed the 50 line and it has breached the trend line resistance, while the MACD has a new bullish signal cross) however both the Stochastic and the RSI(5) are overbought hence next week odds should favor some consolidation activity
60 minute time frame:
- The sharp rally from the May 19 lod has enabled a bullish cross over of the 50 hma above the 200 hma. This is a bullish signal that is strongly suggesting that price has resumed the up trend
- So far the internal structure of the current up leg is impulsive, in which case price should be close to completing the first wave of an impulsive sequence. If this is the case SP 500 will break through the May all time high in the days/weeks ahead
- The negative divergence of the hourly RSI is increasing the odds of a short-term pullback
- If Oil is carving out a potential Rising Wedge, if it plays out a pullback towards the “major” horizontal support located at 43.65 should not be ruled out. If this is the case we shall see how the equity market withstands weakness of the energy sector.
In the technical front:
- SP 500 Advance-Decline Line: New all time high is a bullish signal that should allow SP 500 to achieve new ATH as well
- NYSE Summation Index could have bottomed out with an oversold RSI. It is now curling up however a buy signal has not been triggered yet
- The McClellan oscillator has reclaimed the zero line (Bullish signal) however it is tagging the upper Bollinger band with a overbought RSI (5) consequently the short-term risk should be above average
- CBOE Equity Put/Call ratio extreme low reading is also aligned with the short-term scenario of a pullback (Contrarian indicator)