Technicals | Sep 27 2017
Bottom Line 26/09/17
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 2405 / 2322 / 2233 / 2187
Resistance Levels: 2509 (all time highs)
Technical Discussion
The S&P 500 is currently in it's fifth longest streak in history without a 5% correction having taken place, and this will become the longest in history by mid December if such a correction fails to occur by then. Goldman Sachs have a bear market risk indicator and this is now showing the risk of a decent correction rising to 67%. The U.S markets are certainly looking well stretched and technically in our view there is the possibility that a corrective phase has already been evolving here since August, even with price recently finding itself back into blue sky territory.
Last night markets in the U.S were slightly weaker as tensions grew yet again with North Korea, with the majors down anywhere between 0.22% and 0.88% with the tech sector being the weaker. Yet more interestingly the Volatility Index (VIX), commonly known as Wall Street's fear gauge, closed up 6.47%. So something could be simmering away here behind the scenes, although we have been seeing signs of this for a couple of months now with little coming from it. Continuing to tread cautiously.
Reasons to stay longer term bullish (yet overdue for a medium term breather):
→ 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 is continuing to push into new all time highs
→ yet a pullback is now well overdue
'The ending diagonal continues to be in play and as we've talked about in our last few reviews, has already fulfilled all its criteria in regards to being complete.' Yet price action is simply continuing to push on into new all time highs even as recent as late last week. So this may seem an odd thing to say yet we do still see scope for price action to have been in corrective mode since the 8th August rejection bar. What followed post this was a break below the lower boundaries of our proposed longer term bearish ending diagonal. This was via a simple a-b-c corrective type move, with the recent support that came in post this also potentially corrective to the upside, even though price has tagged new highs as part of the process. So sticking with our continuing need to see a healthy medium term breather, our ideal scenario from here is for an expanded flat (a)-(b)-(c) corrective move to continue to evolve over the coming weeks which should take price back down towards the 200 day moving average circa 2400 for starters.
It would be here that we would be locking in an intermediate Wave-A only, with further consolidation likely to follow until the full A-B-C corrective move finally completes. Naturally enough if price just continues to push on north from here, then symmetry will be lost on the proposed pattern and yet again price action will be negating our immediate analysis. We continue to be longer term bullish regardless of any short to medium term gyrations in price, yet for the longer term trend to remain robust and healthy, some form of pullback is going to be required at some stage soon, if it already isn't in the process of occurring. As stated, we recommend exercising caution from here.
Trading Strategy
Cyclic trends in either direction are very difficult to put a halt to. The U.S markets have been in bullish mode ever since the 2009 post GFC lows were locked into place, and as we've said in numerous reviews, we continue to believe that there is still plenty of fuel left in the tank just yet. Yet our Elliott Wave count and interpretation of the immediate pattern to hand is calling for a multi month breather, although basis the overall trend we continue to believe it will be a shallow affair and nothing to be concerned about bigger picture. This market is very high risk to try and short though, so even when we are finally granted the breather we are looking for, we are going to stay sidelined throughout the process and simply continue to look for a buying opportunity post all this yet from lower levels. Riding the longer term uptrend is the aim, not betting against it!
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).
Risk Disclosure Statement
THE RISK OF LOSS IN TRADING SECURITIES AND LEVERAGED INSTRUMENTS I.E. DERIVATIVES, SUCH AS FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER YOUR OBJECTIVES, FINANCIAL SITUATION, NEEDS AND ANY OTHER RELEVANT PERSONAL CIRCUMSTANCES TO DETERMINE WHETHER SUCH TRADING IS SUITABLE FOR YOU. THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN FUTURES, OPTIONS AND CONTRACTS FOR DIFFERENCE TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. THIS BRIEF STATEMENT CANNOT DISCLOSE ALL OF THE RISKS AND OTHER SIGNIFICANT ASPECTS OF SECURITIES AND DERIVATIVES MARKETS. THEREFORE, YOU SHOULD CONSULT YOUR FINANCIAL ADVISOR OR ACCOUNTANT TO DETERMINE WHETHER TRADING IN SECURITES AND DERIVATIVES PRODUCTS IS APPROPRIATE FOR YOU IN LIGHT OF YOUR FINANCIAL CIRCUMSTANCES.
Technical limitations If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
