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Price & Time: S&P 500 - Calm Before The Cyclical Storm?

Price & Time: S&P 500 - Calm Before The Cyclical Storm?

Kristian Kerr, Sr. Currency Strategist

Price & Time covers key technical themes daily and can be delivered to your inbox each morning by joining the distribution list: Price & Time

Talking Points

  • S&P 500 rebounds ahead of key pivot
  • 2020 Fibo remains critical

Unfamiliar with Fibonacci Relationships? Learn more about them HERE

S&P 500: Rebounds Ahead of Key Pivot

Price & Time: S&P 500 - Calm Before The Cyclical Storm?

Last week I was looking for the S&P 500 (FXCM CFD) to turn around key resistance at 2020 after the FOMC decision (read HERE). It turned out to be a pretty good view as the reversal in the index occurred from just one point above all that symmetry. The big question now is whether that reversal marked some sort of important secondary high before a re-test of last month’s lows?

The 1900-1905 area is key in this regard as it marks a convergence of the 61.8% retracement of August – September advance and the month-to-date low. Yesterday’s rebound from just above there was not all that surprising given the importance of the pivot and the fact that sentiment was at some negative extremes as the fairly reliable contrarian indicator DSI (Daily Sentiment Index) fell below 10% bulls mid-week.

However, the index is not out of the woods yet by any means and as long as it stays under 2020 the path of least resistance stil looks to be lower. A move under 1900 next week would confirm this negative take on things and set the stage for a test of the August closing/intraday lows and probably a very turbulent October. Should this rebound gather pace, I would expect resistance to materialize around 1985 and 2000, but as stated above only aggressive strength over 2020 would signal that the index has turned a more important corner.

The other biq question mark continues to be the 2011 analog as it has been a decent “sherpa” over the past few weeks. If we continue to follow its trajectory then it argues that we could see a more aggressive recovery here, but even if that is the case then 2020 would still need to hold as above it the analog would start to fall apart.

DISCLOSURES

--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com

To contact Kristian, e-mail instructor@dailyfx.com. Follow me on Twitter @KKerrFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES