• 2 hours Newmont Mining Teases Investors With Special Dividend
  • 5 hours Central Banks Double Down On Gold
  • 7 hours Don't Write Off Cryptocurrencies Just Yet
  • 23 hours Trade In Counterfeit Goods Hits Half A Trillion Dollars
  • 1 day Tesla Struggles To Compete In European Market
  • 2 days China: The New King Of Caviar
  • 2 days Gold Mid-Tiers Rally On Fresh Earnings Reports
  • 3 days Can The British Pound Overcome Brexit?
  • 3 days Is A Gold Breakout Near?
  • 4 days Federal Reserve Downgrades U.S. Growth And Cuts Rate Hikes
  • 4 days Disney Beats Out Comcast In $71.3B Mega-Merger
  • 4 days The Feds Continue To Prop Up Equities Markets
  • 4 days Bejing's Sway In South China Sea Is Fading
  • 5 days Saudis Eye Billions As Stocks Get Emerging Market Boost
  • 5 days Airbnb In Acquisition Mode Ahead Of IPO
  • 5 days Gold Hangs At $1,300 Ahead Of Fed Meeting
  • 5 days Champagne Sales Slow As European Economic Worries Grow Louder
  • 6 days Putin Signs “Digital Iron Curtain” Into Law
  • 6 days Russian Metals Magnate Sues U.S. Over Sanctions
  • 6 days Tesla Looks To Jump Into Indian Market
Tesla Struggles To Compete In European Market

Tesla Struggles To Compete In European Market

Tesla continues to catch the…

Trade In Counterfeit Goods Hits Half A Trillion Dollars

Trade In Counterfeit Goods Hits Half A Trillion Dollars

The counterfeit market has breached…

  1. Home
  2. Markets
  3. Other

SP500: Oversold Rebound - How Far Can It Go?

We have a countertrend rebound underway. Where it will fail?

Monthly time frame: The trend is down

  • Price is well below the 10 mma
  • From the May high we have a sequence of lower low / lower high

However bears have to breach the trend line from the 2009 low in order to open the door to a large correction that could aim at the massive support zone 1573-1553

S&P500 Monthly Chart
Larger Image

There is a potential Head & Shoulder that has a measured target at 1611, but if bulls are able to achieve an end of month print around 1968 ish it would result in a monthly Hammer, which would most likely invalidate the bearish pattern.

S&P500 Monthly Chart 2
Larger Image

Weekly time frame:

  • From the May high we don't have an impulsive decline, instead so far price has unfolded a 3-wave down leg (ABC)
  • In my opinion the wave (C) is not done yet (Fibonacci extension targets are in the range 1776 - 1683)
  • This week the Hammer candlestick is suggesting that a short-term bottom is in place. Hence odds should favor a larger rebound
  • Above the high of the week we have Resistance 1 at 1950 and Resistance 2 in the range 1972 - 1993
  • The support is located at 1866

S&P500 Weekly Chart
Larger Image

If my EW count is correct the down leg from the November 11 lower high is the wave (C) of a Zig Zag / Double Zig Zag / Triple Zig Zag

Hence a wave (C) can either be impulsive or an Ending Diagonal

a) Wave (C) impulsive:

If this is the correct pattern the current rebound is a wave (4) and should not substantially breach the resistance located at 1950 ish. The following down leg will complete the Zig Zag from the May high and the pattern will have to be reassessed

S&P500 Weekly Chart 2
Larger Image

b) Wave (C) Ending Diagonal:

If SP 500 is carving out an ending diagonal the current rebound will be much larger. But the Converging Pattern will require more time in order to be completed (A sequence of 5 overlapping waves within two converging trend lines)

Wave C Ending Diagonal
Larger Image

Daily time frame:

  • If the current rebound is a wave (4) I have highlighted in the chart below the important price levels that we have to monitor next week
  • If Friday's gap is closed then the rebound will most likely be over.

S&P500 Daily Chart
Larger Image

  • I am going to watch the RSI (14) that should not breach the trend line resistance from the November high

S&P500 Momentum
Larger Image

In the technical front two breadth indicators are suggesting that maybe the oversold rebound could be large:

  • Tick Cumulative is extraordinary bullish

TICK Bullish Chart

  • The McClellan Oscillator could display a breadth thrust if next week the zero line is reclaimed with authority

NYSE McClellan oscillator Daily Chart

Regarding VIX If it drops below the support located at 20 ish with a likely bearish signal cross of the MACD then odds would favor a large SP 500 rebound

VIX
Larger Image

Lastly we have to monitor Oil. Maybe it is forming a large Falling Wedge. If this is the case the upper trend line is at 37.80 ish (20% of upside)

Due to the positive correlation if this pattern plays out it would also favor a larger rebound of SP 500

S&P500 Weekly Chart 3
Larger Image

 

Back to homepage

Leave a comment

Leave a comment