Technicals | Apr 05 2024
Bottom Line 04/04/24
4/4:
Daily Trend: Down
Weekly Trend: Up
Monthly Trend: Up
Support Levels: 4800 (zone) / 4200
Resistance Levels: N/A (all-time highs)
Technical Discussion
Reasons to remain longer-term bullish:
-Elliott Wave count is bullish bigger picture via our ongoing analyses
-4800 zone (old all-time highs) has now reverted to support
-interest rates and global political issues remain front and centre
-Wave-3 of (3) continues to head toward its 5400 target
As you know, our focus in relation to the immediate Bull run on the S&P-500, is aligned to decisions being made on interest rates. Naturally enough this is only one aspect, yet it is an important one, and one that affects the Greenback as well.
The US Dollar experienced a broad decline following disappointing services sector data last night, interrupting its recent rally. The Institute for Supply Management (ISM) also reported a drop to 51.4 from February's 52.6, and additionally, data from Automatic Data Processing (ADP) indicated a rise in private sector employment in March, with 184,000 new jobs added in the U.S.
Federal Reserve Chair Jerome Powell has reiterated the necessity for further data before considering interest rate cuts, a move anticipated by financial markets to be in June. Something that markets right at this juncture appear to be factoring in. His comments echoed the Fed's cautious approach though, balancing the risks of premature rate cuts against the potential for excessive economic restraint.
We need to remember as well that markets were initially expecting the first rate cut to be in March, yet this was slowly yet surely blown out to June, and pretty much coincided with price action starting to chop indecisively within the rising channel that we have been highlighting for some time.
The bias is still to the upside though and for now, the upper and lower boundaries of the channel have remained intact, which is a positive. Yet you just get the feeling that if the Fed delay the proposed rate cut for another quarter, this might just break the back of the lower boundaries of the rising channel and finally lock in a Wave-3 high point.
We continue to target 5400 for the Wave-3 which is aligned to a 1.618 x Wave-1 extension move, which is quite typical for Wave-3's. They can sometimes extend a little higher than this, yet on the flip side they can also come up a little short.
Either way, the Wave-3 move at the moment is nicely extended and therefore highly evolved. We still have some Type-A bearish divergence hanging around on the dailies combined with the weeklies continuing to be well overbought.
Conditions that would normally be the catalyst for a decent breather to take shape. Yet right at this juncture, the dips are only proving to be shallow and well-supported when they occur.
I'm not expecting too much more out of this immediate upcycle, yet that said, until the rising channel breaks to the downside with conviction, we are more than happy to just let price action lead the way until it is finally ready to take a well-earned breather!
Trading Strategy
As we keep saying, the rising channel is what remains in play here which is normally an ending-type pattern. They are always choppy affairs so from a trading perspective we would never offer up a recommendation when these types of patterns are dominating.
So our strategy moving forward from here remains the same, and that is to allow the immediate Wave-3 to play out to its completion, potentially up toward the 5400 mark, then allow the proposed Wave-4 breather to unfold before looking for low-risk opportunities from lower levels.
For all this to play out though it is likely to take a number of months, so further patience is going to be required.
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