Technicals | Jun 08 2017
Bottom Line 07/06/17
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 2322 / 2233 / 2187
Resistance Levels: 2440 (all time highs)
Technical Discussion
U.S and middle East political agendas and increasing uncertainty over the U.K elections created a little bit of hesitation by investors in last night's trading. This was backed by safer haven investing with gold and U.S bonds gaining. Energy was one of the few other sectors that gained with Crude Oil attempting to push below the lows that locked in two sessions ago, yet these attempts at lower levels were quickly bought back up by buyers happy to snap up some contracts at these sub $50.00 levels. The financial sector does continue to look weak though and this it what may be the initial catalyst for U.S Indices to start embarking on a breather of some degree. It's what we've been talking about for quite a number of weeks now yet price action has simply been ignoring our calls. That said we could be getting close and the technical picture right at this juncture is clearly continuing to look well over stretched.
Reasons to stay longer term bullish:
→ S&P 500 earnings remain well supported overall
→ Elliott Wave count continues to have motive bigger picture
→ retracements have been healthy and well supported
→ price is continuing to push into new all time highs in impulsive fashion
The standout pattern is the rising wedge pattern or what is commonly called an ending diagonal. It appears to have fulfilled the minimum criteria of tagging the upper and lower boundaries on a minimum of five occasions. Yet these patterns, especially when larger, can stretch higher, with seven or even nine touches of the upper and lower boundaries of the pattern being possible. One thing is for certain though, and that is as price gets closer and closer to the apex of the pattern, a decision has to be made. The highest probability is that price will break lower, and in the case of the S&P 500 the bearish trigger for such a move will come via a price move below 2352.
Further confirmation will then come via the 200 day moving average being breached which is a little lower around 2300. Targets initially look for a 50.0% retracement of the pattern which would see price over a number of months head towards old resistance now acting as support circa 2150. Yet they can also also retrace the full pattern length which will put the next line of support circa 1900 into the picture. Remember also that from an Elliott Wave perspective we are looking for a higher degree Wave-(3) to lock in here, so the aforementioned pattern targets do have confluence to what would be expected within a typical higher degree Wave-(4) move. We will take a closer look at the numbers if and when we get the initial trigger we are looking for circa 2352. For now though, price action is simply remaining solid to the upside.
Trading Strategy
Basis the analysis we continue to believe that some form a higher degree top is trying to lock in here and therefore to tread with caution in regards to being overly overexposed on the long side. Yes we have been stating this for quite a number of weeks now and the market has simply continued to stretch on higher. Yet being a higher degree count, it is certainly not unusual for price action to extend further than expected within the prevailing trend. Right at his juncture it is still giving no indication that it is ready for a long overdue breather, so all we can do is go with the flow whilst at the same remaining on alert.
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