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S&P 500 Technical Outlook: New Line in the Sand at 2,100

S&P 500 Technical Outlook: New Line in the Sand at 2,100

2015-11-02 16:57:00
James Stanley, Strategist
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Talking Points:

  • S&P 500 Technical Strategy: Flat, long setup met initial target of 2,100 on Friday of last week.
  • Near-term resistance at the 2100 handle could define the S&P’s stance this week
  • With NFP on the docket for later this week, and after a hawkish Federal Reserve put a 2015 rate hike back-on-the-table, the S&P could see considerable volatility over the next four trading days.

In our last article, we looked at both long and short setups on the S&P 500 as we neared last week’s FOMC announcement. And unexpectedly, the Fed took a rather hawkish tilt towards interest rate hikes for the remainder of the year, choosing to remove the phrase ‘monitor developments abroad,’ alluding to the fact that the Asian-slowdown and the carnage in commodities that caused the bank to hold off of a September rate hike were receding as fears dissipated. This could be construed as a positive because the Fed is no longer concerned about global market distress. This could also, longer-term, be construed as a negative should these concerns rise again with the Fed now looking more intently at December for a rate hike.

The one thing that isn’t debatable is price action on the S&P, and that has continued to show a bullish stance as we outlined in our previous piece. The 2,065 level came in, yet again during FOMC as a function of near-term support. This is a relevant level because its 76.4% of the most recent major move in the S&P, taking the high from earlier in the year of 2,137 to the ‘panic lows’ of August 24th. Each of the Fibonacci retracements of this move have seen significant price action, and 2,065 was no different. After publishing last week, we saw three days of support develop in the 2,065 region before prices rocketed higher post-FOMC. Prices continued trickling higher to close the week, topping out at our initial target of 2,100 on Friday. Until a new high is printed above 2,137, this Fibonacci retracement remains ‘active,’ and should prices begin moving lower this could define a trader’s approach for trading the short-side of the S&P. But for now, risk is on in a very big way, so shorts beware.

This high at 2,100 can help define directional-stance in the S&P for the coming week. This is a major psychological level that’s had a tendency to provide support and resistance to the S&P in 2015, and should price action finally break back above 2,100, traders can look to buy on pullbacks with support above 2,080, which was the previous swing-high ahead of last week’s FOMC announcement. Should prices find continued support in the 2,080 region – this could open the door for profit targets at 2,100, 2,125 and 2,137.

The short side of the S&P could be considerably more complicated given near-term price structure. Given that the S&P rose after the Fed took on a hawkish stance, a lack of a clear-driver for the short-side of the S&P could make the case for bearish positions even more daunting. From a technical perspective, prior price action swing lows at 2,065 and 2,060 could provide motive for looking for reversals, but until that happens – this is a bubbling market with most signs pointing to continued bullishness.

S&P 500 Technical Outlook: New Line in the Sand at 2,100

Created with Marketscope/Trading Station II; prepared by James Stanley

--- Written by James Stanley, Analyst for DailyFX.com

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