Featured Trade: S&P 500 is shaping a potential minor mean reversion rebound

A potential minor mean reversion rebound looms for the S&P 500

Short-term technical outlook on S&P 500 (Tues, 31 Jul)

Key technical elements

  • The recent slide seen on the SP 500 Index (proxy for the S&P 500 futures) from its 2848 high of 25 Jul 2018, U.S. session is now coming close to an intermediate support of 2790 (the former swing high areas of 27 Feb, 13 Mar & 13 Jun 2018) (see 4 hour chart).
  • In conjunction with Elliot Wave/fractal analysis, the aforementioned slide from 2848 high has traced out a complete set of 5 waves which may indicate the end of a minor degree bearish impulsive wave 1 with a typical 5th wave end target at 2796 (based on 0.618 Fibonacci projection, 2 points below yesterday low of 2798). Thereafter, the Index is likely to shape a minor mean reversion rebound to retrace its recent decline.
  • The 4 hour Stochastic oscillator has shaped a bullish divergence signal at its oversold region which indicates that the downside momentum of the recent slide has started to abate.
  • The significant short-term resistance zone stands at 2823/28 which is defined by the minor swing high area of 24 Jul 2018, the pull-back resistance of the former minor ascending trendline support from 28 Jun 2018 and the 50%/61.8% Fibonacci retracement of the recent slide from 25 Jul 2018 high to yesterday, 30 Jun 2018 low of 2798.

Key Levels (1 to 3 days)

Intermediate support: 2801

Pivot (key support): 2790

Resistances: 2823 & 2829

Next support: 2740


Therefore as long as the 2790 key short-term pivotal support holds, the Index is likely to shape a minor mean reversion rebound towards the intermediate resistances of 2823 and 2829 before another potential medium-term downleg materialises.

On the other hand, failure to hold at 2790 sees the continuation of the downleg to target the next support at 2740 (the lower limit of the bearish  “Ascending Wedge” in place since 03 Apr 2018).

Charts are from City Index Advantage TraderPro

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