UPDATE Start of new impulsive up move in SP 500 within a potential blow off phase

Medium-term technical outlook on S&P 500

click to enlarge charts

Key technical elements

SP 500 Index (proxy for the S&P 500 futures) has staged a bullish breakout from its former medium-term descending channel in place since its current all-time high level of 2959 printed on 01 May 2019 now turns pull-back support at 2800.
Medium-term momentum has turned positive with the daily RSI oscillator that has reversed up from its oversold region.
The bullish reversal low of 2728 printed on this Mon, 03 Jun coincides with the 1.00 Fibonacci projection of the decline from 01 May high to 13 May 2019 low projected from 16 May 2019 high and the 08 Mar 2019 swing low area. Elliot Wave/fractal analysis suggests the start of another potential impulsive up move sequence that may see another fresh all-time high.
The key medium-term support rests at 2768 which is defined as the 61.8% Fibonacci retracement of the on-going V-shaped rally from 03 Jun 2019 low.
Medium-term resistance stands at the 2890/2900 zone which is defined by the swing high areas of 11/17 May 2019 and close to the 76.4% Fibonacci retracement of the previous decline from 01 May high to 03 Jun 2019 low.
The 4-hour Stochastic oscillator has reached an extreme overbought level at 97 which highlights the risk of an imminent minor pull-back at the intermediate resistance of 2840.

Key Levels (1 to 3 weeks)

Intermediate support: 2800

Pivot (key support): 2768

Resistances: 2840 & 2890/2900

Next supports: 2730 & 2630

Conclusion

The preferred medium-term (1 to 3 weeks) bearish scenario for an extended corrective down move has been invalidated (click here for a recap). Right now, the Index is likely to be shaping an impulsive up move within a long-term cycle degree wave IX that may lead to a potential “blow-off” top. The narrative of the on-going bullish sentiment is led by a “group think” that the U.S. central bank, Fed will be a “liquidity provider of last resort” to cut interest rates or establish another round of QE to support risk assets from falling further in the backdrop of macro environment uncertainties (trade tensions on top of a brewing cold war between U.S. & China).

Similar narrative in a different time and environment before a major top occurs; in 1999 where dot.com and technological stocks were trading at high valuation levels and the justification was the start of a new technology wave that had driven up productivity to support such high valuations. In 2006-07, where the housing boom had been justified by demographics changes and the increased usage of securitization to reduce default risk in housing mortgages.

Watch the key medium-term pivotal support at 2768 that should hold any movement of minor pull-back before another potential up move materialises to target the next resistance at 2890/2900 in the first step.

However, failure to hold 2768 negates the bullish tone for a retest on the 03 Jun 2019 swing low area of 2730 and only a daily close below 2730 revives the corrective down move scenario towards the next support at 2630 (also the 50% Fibonacci retracement of the last up move from 26 Dec 2018 low to 01 May 2019 high).

Charts are from City Index Advantage TraderPro

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.