December 2018

uploaded Dec 2, 2018

Taking a look at the S&P 500 index for the shorter term here

The index found support at just below the 2650 level, and advanced last week. The greatest factor for the support and bounce came from what Fed Chair Powell said on Wednesday! The market took the words he said about rates being “just below neutral”, as the Fed is about to stop rising rates, which is a dramatic turnaround from what he stated last October!  Whether the Fed intended it that way is up for interpretation! Another rate increase is expected in Dec. What happens in 2019 regarding rates remains to be seen!  In any event his words on Wednesday served to bolster markets higher. Where we go from here is up for discussion today!

The chart on the right is a S&P 500 index daily chart going back to 2016.

Here are some significant points to consider. There’s that May 2016 to Feb 2018 uptrend line of importance! Last week the index penetrated above it. If this was a weak market that wouldn’t happen!  That line would have acted as resistance and dropped prices. However it’s really not that uncommon for levels to go just above or below support or resistance levels at times.  Favoring a stronger move higher view is the fact the price also penetrated above the shorter term orange resistance line.

Looking at some resistance levels on a further move higher.

There’s a Fib confluence around the 2776/2784 area, which are both a 50% and 38.2% level. That area might pose a problem for a continued advance, which I suspect the area will act as somewhat of a hindrance. Should the index manage to climb above 2788 then it’s likely to reach the early November high of 2815 for a retest and drop from there. Once the price moves to 2815 level becomes (1) a triple top, (2) a 61.8% fib level and (3) also a resistance pivot. The combinations of all three can act as strong resistance!

The indicator below the bar chart is a stochastic with three settings, fast (black line), intermediate (blue line) and slow setting (orange line).  What the stochastic black line is suggesting is we’re nearing a peak in the advance on a shorter term basis. It’s likely the advance will last a few more days. Probably till Tuesday is my guess!  The blue line crossed above the orange line last week! That hints we could see the index advance over a longer period. The orange stochastic line is below 50, which isn’t all that reassuring for the longer term! If and when the orange line moves above 50 a greater degree of confidence can be had for seeing advances.

As it stands now I’m looking for a few more days of advances then a pullback to anyone of the Fib levels and/or a uptrend support lines.

Here’s how I see it play out over the next few weeks.

Index advances to around 2788 pulls back a few days then moves back up to around the 2815 area to form a triple top and falls from there. Beyond that is a harder call to make! It would be encouraging if we see the orange stochastic line move above 50 and remain above 50 for a sustained period. That would mean the index is in a longer uptrend.

That’s it for now.

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