Technicals | Aug 03 2018
Bottom Line 02/08/18
Daily Trend: Down
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 2692 / 2594 / 2554 / 2532
Resistance Levels: 2873 (all time highs)
Technical Discussion
The U.S Federal Reserve meeting wrapped up on Wednesday with the expectation of no rate hike coming to fruition. That said there was no backing off on the Central Bank's hawkish stance moving forward. Overall they are clearly remaining accommodative ! The S&P 500 closed slightly down last night although the Nasdaq was up on the back of solid results coming from the Apple Inc camp. The U.S economy is also remaining solid at the moment growing at a 4.1% annual rate, yet this has been helped strongly by recent Federal tax cuts and some spending stimulus. There is also expectation that growth may moderate in the second half of the year which may affect the number of interest rates hikes being projected before the year is out. And a less aggressive interest hike agenda is generally seen as stock market positive. Lets take a look at the technicals.
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 to this point
→ price has been consistently pushing into new all-time highs
The minimum 23.6% retracement target we were expecting for the higher degree Wave-(4) measured in at 2445 with the typical 38.2% even lower. Yet all price ended up attaining was 2532 so about 90 points or so short of the former. Yet I'm still not convinced deeper levels wont be attained as part of a higher degree Wave-(4) still unfolding. Yes we are presently leaning on the expectation of another run higher out of the ascending triangle that targets 3051, yet this pattern wont fully start to prove until price action starts performing with better conviction. And that will only come via a move that sticks above the all time highs circa 2873. Thus far price has tagged 2848 on this immediate run north and is now looking to retest the original breakout zone aligned to the 2800 price point. So this is where things now get interesting. If the retest fails, starting with price breaking back into the pattern and below 2770, then this pattern breakout may well fail which will then put the 200 day moving average back under pressure circa 2700. Then any break below 2700 will see us back with the higher degree Wave-(4) still being incomplete, with price therefore heading even lower over the next couple of months. Very interesting juncture right here !
Trading Strategy
We remain long at 2802 post the larger ascending triangle breaking out to the upside. Yet in between reviews we have cut our risk right down with our stop position now at 2770. We are comfortable seeing a little more weakness over the coming days, yet overall it needs to be only minimal if our trade is to continue to have legs. Respect the stop and we'll see how it goes.
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