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S&P 500: Confluence Points to a Bounce, Even if for Just a Day

S&P 500: Confluence Points to a Bounce, Even if for Just a Day

2016-11-03 11:31:00
Paul Robinson, Strategist
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What’s inside:

  • The S&P 500 has been down numerous days…
  • Trading into a confluence of support
  • Short-term view with levels outlined

The S&P 500 hasn’t had a positive day since last Monday, which isn’t to say the market should bounce just because it’s been down numerous consecutive days, but it certainly means, statistically, we are very likely close to at least one day up. With the election on Tuesday, and lots of uncertainty surrounding it, it is reasonable to conclude whatever bounce we get won’t be uber-powerful.

Where might a bounce come from, even if only for a day?

There are a few lines of influence intersecting in the vicinity of yesterday’s low at 2094 down to about 2085 – June, August, and October parallels (see chart). Below there the widely-watched 200-day lies at 2081. So, even though consecutive down days, in and of itself, doesn't qualify as an oversold indicator, when we have a confluence of technical events close at hand it increases the odds we will see support act as a springboard. (A good shorter-term oversold/overbought indicator is the % of stocks in the S&P 500 trading above the 10-day MA, which is currently at under 23%. It’s down there, but not until sub-10% will alarms begin going off.)

S&P 500: Daily

S&P 500: Confluence Points to a Bounce, Even if for Just a Day

Created with Tradingview

For the short-term operator, here is a look at the 60-minute chart. In the 2094/85 confluence zone down to the 200-day at 2081 at the worst, we will be on the lookout for a reversal in price action (i.e. – pin bar, bullish engulfing, etc.). Should we start to bounce, the first key area of resistance comes in at the underside of the 10/24 channel (~2110/12), then the more important daily swing low at 2115. With some vigor, the 10/28 pivot at 2119 will come into play. Beyond there, with a really aggressive rally (unlikely at this time) we would look to top of 10/24 channel and the important 2130/33 area.

If aggressive selling continues to carry the market lower, then we may have to continue to use broken support levels as resistance levels on weak bounces until we see some kind of flush that indicates the move is over.

60-minute

S&P 500: Confluence Points to a Bounce, Even if for Just a Day

Created with Tradingview

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---Written by Paul Robinson, Market Analyst

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